Deal Hunters May Be Disappointed This Holiday Season

Shoppers will find only modest discounts this holiday season.

Frank Badillo is a senior economist with consulting firm Kantar Retail.

What’s the outlook for holiday sales? Black Friday and Cyber Monday are more important this year for price-sensitive consumers, but people could be hard-pressed to find the same great deals they found last year. We expect weaker spending for the holidays overall because of the turmoil in the stock market and economic uncertainty. Holiday sales will likely increase at only half of last year’s 5.5% growth rate.

What types of deals can shoppers expect? Retailers could start holiday promotions by early November. You’ll see more deals offering a certain percentage or dollar amount off a total purchase -- such as $10 off if you spend $25 or $50 -- rather than x% off a particular item. Higher commodity costs for retailers are limiting their ability to cut prices. Offering a dollar amount off a total purchase allows retailers to preserve price increases for specific items while offering savings to the consumer. Shoppers should also be on the lookout for deterioration in the quality of clothing -- whether it’s thinner fabric or fewer accessories -- as retailers try to maintain profits.

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What are the best ways to shop this year? Savvy shoppers will find better deals online. Shopping online gives consumers the information and tools they need to compare prices. Expect lots of free shipping, too. We’ll see more retailers come up with new tools to offer value. A new app from Lowe’s is a good example; besides allowing you to shop online, it lets users in the store scan items on the shelves to get more product information or watch demos. Getting on retailers’ e-mail lists will alert you to deals. You can also find deals on stores’ Twitter feeds and Facebook pages.

Where will consumers find the best buys? Whether it’s Walmart, Target or the dollar stores, mass-value retailers will offer the best deals. Their mid- to low-income shoppers are looking for bargains more than ever in this economic environment, and competitive pressures are high. You’ll find attractive prices on PCs and tablet computers, as well as toys -- particularly video games and consoles. For apparel, though, take a look at upscale department stores, such as Saks. If wealthier shoppers pull back due to the fall-off in the stock market, those stores may offer deals.

Jennifer Schonberger
Staff Writer, Kiplinger's Personal Finance