Local retailers change holiday season strategies for price-savvy customers

December 9, 2009

By Staff

Analysts expect a small increase in retail sales over last year, one of the worst on record

With unemployment hovering just below ten percent in Washington, local retailers are courting customers looking for best bargains this holiday season.

With only modest growth predicted this season, local shopkeepers are luring recession-weary shoppers with more merchandise at the low end of their price ranges and promoting perks such as free gift wrapping.

Many store owners are anxiously waiting to see whether this year’s holiday sales meet their diminished expectations, which could mean the difference between a loss and a profit for 2009. Some stores could be doomed if they experience a repeat of last year’s disastrous season—the first time that holiday sales have dropped since the National Retail Federation began tracking them in the early 1990s. The economic recession and bad weather right before Christmas pushed sales down locally.

The effects of another down season would be felt in Snoqualmie Valley and across the state. The retail sector provides jobs for one of every 10 nonfarm workers in Washington state, and it is one of the largest employment sectors in the valley.

State and local government depend on sales tax revenue to pay for a large portion of their budgets. Retailers bring in around 15 cents of every dollar that ends up in the state’s general operating fund. North Bend heavily relies on sales-tax revenue, which provides about 85 cents of every dollar in the city’s general operating fund.

“Our bread and butter is retail sales,” said Elena Montgomery, North Bend’s finance director. So far this year, North Bend’s sales-tax revenue has been down.

“We’ve been running seven to eight percent lower than last year, but in the last couple of months we picked up a few percentage points,” she said.

The city isn’t expecting any big jump or drop in local retail sales this holiday season. Holiday retail sales in Washington are expected to increase one or two percent over last year, according to the state’s chief economist Arun Raha.

Nationally, expectations range from down one percent to up three percent.

“One or two percent over a really bad year isn’t really that good,” Raha said.

Weak consumer confidence from the high unemployment rate and a higher savings rate are limiting how much people plan to spend this year, he said.

However, some analysts think consumers are more confident this year.

Retail strategist Dick Outcalt predicts retailers’ sales will increase by half as much as they dropped last year.

“Shoppers are more confident and more anxious to buy merchandise more than they have been in a year,” said Outcalt of the Seattle-based consulting firm Outcalt and Johnson: Retail Strategists.

He predicts consumer confidence will be buoyed by a more stable economy, a more peaceful Iraq, a resurgent stock market and an unemployment rate that appears to have peaked.

Wherever consumer confidence is this year, shoppers will likely be looking to stretch their dollars as far as possible.

“The good news for an outlet mall is whatever consumers are spending, they’re looking for value. People have migrated to the lower price points,” Raha said.

Shoppers came to the Factory Stores in North Bend looking for good deals on Black Friday, the day after Thanksgiving when many retailers become profitable – or ‘go into the black’ – for the year. Some stores opened at midnight with special offers for eager shoppers.

Paula Satterberg did most of her on Black Friday and on the Internet, she said while shopping at PacSun for a backpack to give as a gift. She often makes the 20-minute trip from her home in Ravensdale to the Factory Stores.

“We’re not exchanging gifts with as many people this year, so we won’t be spending as much money,” she said.

The mall had record traffic counts, according to Ed Cook, the mall’s general manager.

“It was probably the largest single-day traffic count we’ve had, so the shoppers are out,” he said.

Like other local retailers, the Factory Stores were hard hit by cold, icy weather in December 2008 that made driving conditions dangerous, which kept many shoppers at home and forced some stores to close. The mall draws customers from King County to British Columbia and east of the Cascade Mountains.

Overall, business seems to have been fairly consistent this past year, Cook said based on conversations with tenants.

“Shoppers are savvier and are looking for better deals, which puts us in pretty good stead,” he said.

On Snoqualmie Ridge, Hip 2 B Square’s customers have been looking for deals.

“Consumers are trying to be more innovative about getting the best value,” said Kimberly Hutchison, the scrapbooking store’s owner.

Unlike most retail shops, Hip 2 B Square helps customers create a finished product—a scrapbook. It can be an inexpensive and very personal—but also time intensive—gift, she said.

Hip 2 B Square’s benefited from shoppers looking to stretch their money by supplementing their budget with their own time, she said.

Hutchison is also focusing more on less expensive items and offering more how-to classes, “so people won’t have to break the bank,” she said.

“People have less money to work with this year, and [a class] gives them an opportunity to get out and do something. And they come out with a Christmas gift in the end,” Hutchison said.

Still, holiday business for Hip 2 B Square hasn’t picked up as quickly as in past years. Other stores have seen a similar trend.

“I think a lot of customers are waiting for the last minute to see if there are any better deals closer to Christmas,” said Chuck Gleghorn, owner of Scriptures Christian Store in Snoqualmie.

Unlike many retailers, Gleghorn also gets a sales boost around Easter, but most shops depend on sales in November and December to turn a profit.

He expects this year’s sales to be similar to last year, which was down from previous years.

However, not all shoppers are paring back this year.

“I’ll probably be buying more this year, because I have a better job,” Linase Neal said while shopping at the Factory Stores. She works as a flight attendant.

The Auburn resident said she regularly comes to the outlet stores. Earlier that day she bought a purse at the Coach store.

Still, most shoppers appear to be concerned with widespread joblessness.

Nearly a quarter of respondents to a recent survey of 207 households in the Seattle area said their jobs are “not at all” or “not very” secure, according to professional-service firm Deloitte.

A year ago, fewer than one in six respondents felt unsure about their jobs. Since then, two of the region’s largest employers, Boeing and Microsoft, have cut jobs, and unemployment in the state is at 9.3 percent.

As a result, consumers are saving more to pay down personal debt, said Lynette Frank, who advises retailers as a partner for Deloitte in Seattle.

Respondents last year said they planned to spend an average of $1,499 for the holidays. This year, they plan to spend $1,235 — an 18 percent drop. Planned expenses include gifts, decorations, entertaining and socializing.

Regardless of the economy, one thing remains true for all retailers, Hutchison said. “You have to figure out what people need and offer that to them.”

SnoValley Star reporter Tara Ballenger contributed to this report.

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