Bargain hunters to boost discounters

By AL SWANSON  |  Oct. 30, 2001 at 3:15 PM
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CHICAGO, Oct. 30 (UPI) -- Despite layoffs and dismal economic reports, the average American household plans to spend more than $900 on holiday gifts this year and discounters will be among the biggest winners.

Banc One chief economist Diane Swonk says practical purchases will replace extravagance as consumers rein in spending because of economic uncertainty but recent surveys conducted after the Sept. 11 terror attacks show Americans are ready to shop if they can get a good deal.

"Understand the outlook for the holiday season is as much emotional as it is economic this year," Swonk wrote in her annual holiday shopping outlook Tuesday. Swonk said people likely will stay closer to home this year and spend more on small intimate gatherings rather than the lavish holiday parties of the past.

She predicts consumers will show less selfishness and that spending on luxury personal care items and recreation will fall sharply. Tourism, resorts and personal services could see big losses despite aggressive holiday cut-rates.

In its yearly survey, the National Retail Federation found consumers plan to spend an average $940 per household over the holidays -- and that nearly two-thirds, 65.6 percent -- plan to take advantage of discounts and sales to make non-gift purchases for themselves.

The survey of 1,000 people was conducted Oct. 19-21.

Even with consumer confidence, as measured by the Conference Board, at its lowest point in seven years, 56 percent of Americans said recent events would not curtail their holiday shopping, according to a telephone survey by MOHR Learning, a unit of Boston-based Provant Inc. Fifteen percent said they would do more shopping online.

"There's anxiety, but also determination," MOHR Learning head Michael Patrick said. "There's fear but also a wish to be connected with other people."

Retailers may be forced to adopt the marketing strategies of successful discounters like Wal-Mart, Target, warehouse clubs and even bargain-basement dollar stores to get shoppers back.

Swonk predicts a 3 percent increase in total retail sales in November and December fueled by purchases for the home, with spending on general merchandise and apparel rising 2.1 percent.

However, she said, interest-free financing offers that revived stagnant auto sales in late September and October showed consumers were willing to make big-ticket purchases if the deal is right. GM, Ford, Chrysler and Toyota have all extended their zero-interest loans into November even through they could cannibalize future sales.

According to Swonk, buyers will be looking for sales on appliances and furniture as well as cars, and that sales of cell phones, personal computers and consumer electronics will pickup as people spend more time with their families.

Online and catalog merchants will take sales from traditional department stores if terrorism fears persist.

"So far, however, consumers have flocked to the malls just to feel some sense of normalcy after Sept. 11," Swonk said. "We are, after all, social creatures."

The National Retail Federation poll found consumers more resilient than might be expected with the military bombing Afghanistan and threats of bioterrorism.

"There may be more enthusiasm from consumers than originally forecast for gift shopping, decorating and browsing for bargains," NRF President and CEO Tracy Mullin said.

Swonk remains optimistic about a strong rebound after the holiday season, barring major disasters, because the monetary stimulus from a series of Federal Reserve interest rate cuts is beginning to take effect and the overall financial system appears healthy.

"Gains of 20 to 30 percent in the broader stock market indices are very easy to envision in 2002," she said. "Other economies have adapted to terrorism and successfully expanded -- notably the U.K. and Israel."

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