Promotions rule holiday retail
Kmart has begun its holiday promotions significantly earlier than in years past
Facingacountry in financial turmoil and consumers who are increasingly keeping their wallets closed, several major retailers announced aggressive holiday marketing programs last week that start earlier than previous years.
For months, industry watchdogs have predicted that this would be a highly promotional holiday season at retail because of the tough economy. But, with Kmart launching pre-Black Friday sales on November 2, Kohl's holding its first storewide sales the weekend of November 7 and Nordstrom doubling rewards points for loyalty customers, the promotional activity is beginning to change the tenor of the holiday season.
Black Friday refers to the day after Thanksgiving when retailers' financial books traditionally move from the red into the black for the first time.
“Black Friday isn't just a day anymore — it's Black Month,” said Candace Corlett, president of WSL Strategic Retail, a New York-based marketing consulting firm.
Because consumers told Kmart it would be easier on them if not all of the big deals were on Black Friday, the multichannel merchant will promote discounts of 25% to 60% off a group of five to six items from a specific category each week, starting with its November 2 weekly circular. “Consumers are saying that it's going to be tighter economically this year, so they need to be able to shop earlier, to take advantage of deals and to stay within their budget,” said Tom Aiello, VP of PR at Kmart.
It remains to be seen, however, if these promotions will be enough to draw consumers away from the habit of shopping for Black Friday deals.
“Many consumers may still wait until Black Friday to shop, because that is when they believe they can get the very best deals,” said Britt Beemer, chairman and founder of America's Research Group.
Whether it's earlier in November or on Black Friday, retailers hope for some magic from their promotions — because the latest round of numbers show consumers aren't interested in shopping right now.
A report from the Commerce Department last week indicated consumer spending fell by 0.3% in September. This was the first decline in monthly spending in two years and the largest since May 2005. The report also said consumer spending was flat in August and July.
“It's going to be an incredibly difficult Christmas,” said Beemer. He predicts most retailers will see negative sales for the period, with the exception of discounters such as Wal-Mart, Sam's Club, BJ's and Costco.
Online retail may fare slightly better than bricks-and-mortar retail, with sales flat instead of down, Beemer said.
“Many online sites gave free shipping and handling during the last two weeks before Christmas last year,” a strategy that successfully drove excitement and sales for many, he said. As a result, many consumers will be waiting to see if the same thing happens again this year.
Besides pricing promotions, Kmart's holiday marketing program also includes a promotion with Disney being announced this week that will give customers a chance to win prizes in store.
The discount merchant also is heavily promoting its layaway program — for the first time in its 40-year history — via TV, direct mail and online. This also is in response to what customers are asking for, Aiello said, because the layaway program enables consumers to make regular payments on items without having to use a credit card.
“Our layaway numbers are up significantly over 2007,” he noted.
“I'm really impressed with how aggressive Kmart is being this holiday season,” said Corlett. She gives the retailer high marks for its layaway advertising, which started before Halloween.
Kohl's also is aggressive this holiday season, promising more than the double the savings offers from last year, including more special savings days for charge card customers, storewide sales beginning earlier in the season and more special offers via e-mail and on the chain's Web site.
Even luxury retailers are feeling the need to find ways to nudge shoppers a little more than usual this year.
Nordstrom said last week that it will double the rewards points it offers all of its credit card holders through the end of the year. Customers typically earn two rewards points for every dollar they spend and can redeem the points for benefits.
“Nordstrom doesn't tend to run a lot of sales, and when you don't run a lot of sales, you don't have a lot of [promotional] tools,” Corlett said. So, doubling reward points is what one would expect Nordstrom to do if it were trying to encourage its upscale shoppers to buy more.
However, this may not be enough. Beemer noted that luxury customers have been “devastated by the stock market declines.”
As a result, many parents at the upper end of the income spectrum are talking about foregoing gifts for themselves this year so that they can give gifts to their children at the same level as in the past.
In that case, “the deals are irrelevant if you're looking for them at all,” Beemer continued.