Holiday Retailers Take a Different Tack
Cost cutting and lower wholesale prices should help merchants turn a profit, even though sales volume won’t give them much to cheer about.
With sales figures expected to show little or no increase over last year’s dismal tally, retailers will focus efforts on wringing greater profits from each ring of the cash register.
“Profits will be much more the story than sales,” says Mike Niemira, chief economist for the International Council of Shopping Centers. “That’s a function of a lot of factors: cost reductions, store closings, a different product mix and even lower inventories than last year.”
Lower wholesale prices for apparel, footwear and household goods will help. Product costs for general merchandise for the second half of 2009 will decline 5% to 7% from the same period last year, according to Citigroup. Import costs for general merchandise, tracked by the Bureau of Labor Statistics—numbers that roughly parallel the product costs calculated by Citi—started to decrease earlier this year after increasing since late 2007. The lower costs will allow retailers, especially those with large in-store brand lines, to offer plenty of bargains to consumers and still turn a profit.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
And gift card purchases could be one saving grace, even though sales will likely slip as much as 5% this year after falling 5% in 2008. Because recipients tend to see gift cards as “found money,” they bargain hunt less diligently than when shopping with cash or credit cards. Consumers often buy full priced items, blessing retailers with heftier profit margins.
This year, buyers and recipients alike will favor gift cards that can be used to buy necessities and make practical purchases, according to Dave Sievers, principal and consumer products and retail practice leader at Archstone Consulting. Retailers will focus on giving buyers the most bang for their buck. “Retailers are more adept at targeting their offerings at specific shoppers and consumer segments, making more creative gift cards for particular segments,” Sievers says, citing gift cards that double as toys at Target and others tailored for businesses to give to their employees to help pay for their health related expenses.
Look for sellers to discount heavily, especially early in the season, luring shoppers with bargains on flat-panel TVs, digital cameras and the like. Price competition will be necessary in some categories to get consumers to buy: “For specific products that are rising to the top of the list, it’s easy for consumers to trade over (shop a competitor) and for retailers to get consumers to trade over,” says Marshal Cohen, chief industry analyst for The NPD Group, a market research firm. That deal hunting mentality will make discounters and mass merchandisers the big winners throughout the season.
We expect heavy mall traffic in the first weekends of the season, particularly on Black Friday—the day after Thanksgiving—as shoppers look to take advantage of the low prices. “People will go out and see for themselves, ‘What does it really look like?’” when it comes to prices and inventories, according to Stacy Janiak, U.S. retail leader for Deloitte. Great deals will likely peter out after the traditional opening weekend of the holiday shopping season. With inventories low, retailers hope they’ll clear out stock without slashing prices. “It’s been a year of operating in a different environment,” Janiak says, “and retailers have adapted to that.”
For weekly updates on topics to improve your business decisionmaking, click here.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
New $6,000 'Senior Bonus' Deduction: What It Means for Taxpayers Over Age 65
Tax Changes If you’re an older adult, a new bonus tax deduction could provide a valuable tax benefit. Here's how it works.
-
Walmart Plus Members Will Soon Have Their Choice Between Two Streaming Services
Discover which streaming service is coming to the platform.
-
AI Start-ups Are Rolling in Cash
The Kiplinger Letter Investors are plowing record sums of money into artificial intelligence start-ups. Even as sales grow swiftly, losses are piling up for AI firms.
-
What is AI Worth to the Economy?
The Letter Spending on AI is already boosting GDP, but will the massive outlays being poured into the technology deliver faster economic growth in the long run?
-
Kiplinger Special Report: Business Costs for 2026
Economic Forecasts Fresh forecasts for 2026, to help you plan ahead and prepare a budget on a range of business costs, from Kiplinger's Letters team.
-
Trump-Era Regulations Will Broaden Access to Crypto
The Kiplinger Letter The president wants to make the U.S. the leader in digital assets.
-
How to Adopt AI and Keep Employees Happy
The Kiplinger Letter As business adoption of AI picks up, employee morale could take a hit. But there are ways to avoid an AI backlash.
-
The Rise of AI: A Kiplinger Special Report
The Kiplinger Letter Our special report looks at the opportunities and challenges of generative AI and how its rapid move into the mainstream is impacting every aspect of our lives.
-
Big Changes Are Ahead for Higher Ed
The Kiplinger Letter A major reform of higher ed is underway. Colleges are bracing for abrupt change, financial headwinds and uncertainty.
-
AI-Powered Smart Glasses Set to Make a Bigger Splash
The Kiplinger Letter Meta leads the way with its sleek, fashionable smart glasses, but Apple reportedly plans to join the fray by late 2026. Improved AI will lure more customers.