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With just a week to go before Black Friday, the holiday prognosis is looking up.

This story first appeared in the November 19, 2010 issue of WWD. Subscribe Today.

Comp-store gains from 2 to 4 percent are widely predicted. A flurry of surveys from market research firms suggest consumers are less uptight about spending — maybe because retailers say they are prepared to promote as heavily or even heavier than last year, if that can be imagined.


In a string of retail results for the third quarter released this week, almost all companies raised guidance, with some bullishly predicting a strong holiday. Target Corp. said its fourth quarter will be the best of any quarter in the last three years, and even Wal-Mart Stores Inc., which has been struggling with negative domestic sales through this year and an uneven apparel business, is expected by analysts to come out positive for holiday. At the other end of the price spectrum, Angela Ahrendts, chief executive officer of Burberry, said unequivocally that “the luxury sector is back.”

Among the factors cited by industry executives as fueling the new consumer enthusiasm are:

• A generally higher stock market.

• Some signs of economic recovery, even though unemployment remains high.

• Retailers’ promotion-driven attitude.

• Retailers are offering more merchandise at the lower tier of their price structure, or as they prefer to say, presenting “a greater range” of products and prices for holiday.

Not long ago, retailers were depressed about business, frustrated with the economy’s slow recovery and ready for another draggy holiday season. However, “After everybody reported October comps, after the election, and after the weather got colder, there was cause for some optimism. There’s a more business-friendly environment with less uncertainty,” said ITG Investment Research’s softline retail analyst Chandi Neubauer. Still, “Christmas is really going to be driven by promotions, lots of pricing competition, and creativity — more social media, especially in teen space.” The season “might be a little better than people are thinking.”

“Retailers are working against a little bit of a low bar, and consumers are a little tired of being puritanical and feeling more flush after paying down debt,” said Alison Paul, vice chairman, Deloitte. “They haven’t spent any money in a while.” The “new necessities” like smartphones and e-books are driving some business, as well, she added. While the Internet and earlier promotions will eat into Black Friday business, “the promise of those really hot Black Friday offers or promotions — everybody knows they are limited,” Paul said.

According to Deloitte research, gift cards, clothing, computer games and smartphones rank as top gift choices this year. Households earning $100,000 and more are leading the upswing in consumer sentiment and plan to spend 77 percent more on gifts than the average. Gen-Yers plan to spend 50 percent more than the average on nongift holiday items. Also, 37 percent of this group cite careful spending throughout the year as a reason they’re hoping to spend more on the holidays. However, Boomers are most likely to spend less on the holidays [46 percent] and feel their financial situations have worsened.

According to Fiona Dias, executive vice president of strategy and marketing for GSI Commerce, free shipping will dominate retailer promotions on the Web, Black Friday deals are being unleashed earlier this year online and offline with steep discounts, and mobile shopping will be key. “Expect a slew of mobile apps to emerge that let consumers shop on the go,” Dias said.

Other analysts noted that Commerce Department figures citing October retail gains in different sectors and the stock market holding at over 11,000 have also bolstered expectations. So did a flurry of surveys released this month. According to a national consumer poll commissioned by the International Council of Shopping Centers and Goldman Sachs, 31 percent of households plan to shop on Black Friday in 2010 compared with 26 percent in 2009. “With consumers further behind on their holiday shopping than in recent years, Black Friday shopping will likely be intense this year, as consumers shop for bargains to complete their gift lists,” Michael P. Niemira, chief economist and director of research for ICSC, said. “However, Black Friday also continues to be an opportunity for consumers to buy for themselves, as our survey found that consumers expect that about three-quarters of their Black Friday purchases will be on nonholiday items for themselves or their families, rather than gifts,” Niemira added.

 

Research for the National Retail Federation by BIGresearch indicated up to 138 million people plan to shop Black Friday weekend, compared with the 134 million people who said they would last year. “The rules for Black Friday have changed significantly,” said NRF president and ceo Matthew Shay. “Instead of waiting until Thanksgiving Day to announce their promotions, many retailers are getting shoppers excited about Black Friday by offering sneak peeks of deals in advance, using social media to create buzz, or teasing upcoming deals on their Web sites.”

There’s less dependence on reindeer-patterned knits and apparel in general, and a greater reliance on all the accessories for the new mobile communications world, even at apparel stores. Retailers also have mustered whatever exclusives they could from designers and vendors, and have planned “gift oriented” or “giftable” assortments, meaning they’re stocking products people can readily select without much stress, like picture frames, toys, gloves, scarves, shirts, ties, watches, jewelry, cosmetics, and what’s expected to be the biggest selling item — the gift card.

Macy’s is selling magic wands and palm buzzers, and has bolstered celebrity merchandise from Jessica Simpson, Martha Stewart and Rachel Roy for its new in-store gift shops. “There are a lot of products in those gifts shops we never had before,” said Macy’s chairman, president and ceo Terry Lundgren.

“In terms of the number of promotional events, it’s very similar to last year, but our brand advertising is more intense,” he said. “Overall, we’re not spending more in the marketing or price promoting, but actually there is a little more being spent in the fourth quarter. There was a little less in the third. We’re doing more marketing in the digital space, more marketing on Google search and more customizing of communications to customers. If it’s a petite customer, we’re really trying to focus on her. Right now, there’s not a tremendous amount of that, but there will be more of that in 2011 as we fine-tune our database.”

“There’s a much greater focus on gift-giving and identifying key items at all prices points, and a lot are exclusive,” said Stephen I. Sadove, chairman and ceo of Saks Inc. “It’s a mix, some under $100, some under $500, some are under $1,000 or $2,000. We are staying true to the good, better, best,” pricing structure. “It’s a broad range.”

“The biggest change is the amount of exclusives in every price point,” added Kimberly Grabel, senior vice president of marketing at Saks. She cited a line of chocolates with Fritz Knipschildt, a Danish chocolatier, from $25 to $45 for 16- to 32-piece boxes, as well as a line of Brunello Cucinelli exclusive accessories for people and their mobile devices. “As the stock market improves, you see customers, our type, feeling more positive,” Grabel said, adding that “tighter inventory across the board, when there’s limited availability, definitely creates a desire.”

“Higher-end product is selling out quickly. That’s created a lot of hope and optimism,” said Ann Watson, Club Monaco’s senior vice president of marketing. “Our collection for October was really strong, one of the sharpest we’ve ever had. Hand-knit sweaters around $325 sold out within a couple of weeks in October. This holiday season, our marketing is all about engaging our customer across many channels,” and is value driven to convey “accessible luxury.” Also, Club Monaco’s online communications are being ramped up to create “that personal touch” and offer preferred customers shopping advantages, including early previews of products and time-sensitive deals. Watson characterized the season as less cocktail party attire and more gift-oriented and casual. “Our customer wants items that take her to more places than just cocktail parties.”

“We really believe Black Friday still will be the biggest shopping day of the year — even more important to customers,” said Liz Sweney, co-chief merchant of J.C. Penney. “The day after Christmas we feel good about too.…We’re increasing the promotional message and the value message with door busters and ‘big buys,’ ” like St. John’s Bay suede polos and Henleys priced down to $12.99; cashmere-wool at $49.88, and kids digital cameras from Discovery priced $29.99. In addition, 200 Sephora pop-up shops in J.C. Penney stores [that don’t already have permanent Sephora shops] will operate through early January. Penney’s is also launching a mobile commerce site for purchasing by phone and has increased its Black Friday insert 12 pages to 72; and customers who show a MetroCard while shopping Penney’s Manhattan flagship can get $10 off a $50 purchase.

“It is about price,” Sweney said. “We planned very early on to be highly, highly promotional.”

Sears, which for the first time will open its stores on Thanksgiving Day, orchestrated a brand build-up for holiday, introducing the Casa Cristina soft home collection; Bongo and Rebecca Bonbon apparel and accessories, and the Dream Out Loud line from Selena Gomez. “The idea is to develop Sears into more of a destination,” said Tom Aiello, divisional vice president of media relations. “If we look at the customer responses in the past few weeks, we feel very optimistic about how things are going. We see customers engaged in our stores and online.”

 

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