Can Cyber-Santa Save Christmas?

Monday, December 7th, 2009 By

Did Santa’s arrival make cash registers jingle?

The 2009 Christmas shopping season got off to a mixed start according to ShopperTrak, a Chicago-based company that tracks retail sales and retail store traffic. ShopperTrak report that early information shows less than a 1% increase in sales over last year, while store traffic was down by 2.7%. While this is much better news than last year’s almost 20% drop, it’s still not the kind of recovery anxious retailers had hoped for.

Can Cyber-Santa save Christmas?

Online sales, on the other hand, rose 19.6% for “Cyber-Monday” compared to last year, according to Coremetrics, a California-based web-sales tracking company. Holiday shoppers were spending optimistically on big-ticket items like big-screen TVs and electronics, but they were also looking for bargains on more staple items like washers, dryers, and refrigerators. Analysts consider these types of big-ticket retails sales to be encouraging signs.

Increased sales at the expense of profits

One misleading idea among many others in a shaky economic recovery is that sales necessarily equal profits. Many large retailers, such as Target.com, Amazon.com, and Walmart, have increased their discounts on hundreds of popular items. These increased discounts may have boosted recent sales compared to last year, but not necessarily profits. Obviously, each dollar given away as a discount erodes the retailer’s profit margin for that item. Retail success depends on profit margins and not simply on gross sales.

Do discounts cause consumers to delay purchases?

Another issue many retailers are grappling with is the likelihood that steadily deepening discounts actually cause consumers to delay making purchases. For shoppers, the message is that there might be a better deal tomorrow, so it may be wise to wait. After all, if an item was 10% off yesterday, and is 20% of today, it very may well be 30% off tomorrow. The pricing strategies of many retailers may, therefore, actually be contributing to slow sales.

Christmas comes early at the cyber North Pole

December 14th usually marks the end of the online Cyber-Christmas buying season because that is the last day that shoppers can order products and have delivery guaranteed by Christmas. A large part of the Christmas buying-season story will be told on that day. The rest of the story will be played out  in the brick-and-mortar stores between that day and Christmas. If sales in traditional stores jump after the 14th, then it just might be a good Christmas season for retail businesses after all.

Combining on-line and in-store sales gives a truer picture

A naturally occurring phenomenon may be the growing interrelationship between on-line and in-store sales. The buying season may simply be spreading beyond Black Friday as a result of increased web retailing. Slower starts to the holiday buying season may not necessarily mean that it will be a disastrous year for retail businesses. Consumers may simply be shopping and buying in a manner different from previous years. This year’s shopper may require many combination retailers to rethink their pricing and discounting strategies to better maximize their profit margins while maintaining strong sales.

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