Thursday November 23rd, 2006
by: Ed Mayberry, November 23, 2006 5:11:00 am
A new survey by the Consumer Federation of America finds Americans have a few worries affecting how much they'll spend this holiday season--energy concerns top the list. Household expenses and a person's current finances are other key factors, according to Bill Hampel, chief economist at the Credit Union National Association. Almost one-third of consumers say they'll spend less on the holidays. But freight railroads posted their busiest container shipping season in history, which some economists say could signal a booming 2006 holiday season for the nation's retailers. Adam Newar with Eden Capital says the decline of gasoline prices has boosted consumer confidence.
"Principally, the main thing for us, in terms of looking or predicting what's going to happen in retail—I think most retailers would say the same thing—is what is happening in the job market and do consumers feel comfortable about spending money. And our answers to those is positive on both counts. The two big concerns in the markets over the past year have been energy prices and housing, and we have just really felt that with the decline in energy prices, particularly gasoline, that the consumer would be doing fine for this Christmas. The decline in gasoline prices has taken about, has given about $75 to $80 billion back to the consumer. So that's really created a nice tailwind for the consumer going into the Christmas season."
Newar says consumers had two big concerns coming into this part of the year.
"One was gasoline prices and heating. The second has been sort of a general concern, principally in the media, about housing prices. And if you go back and take a look at, in effect, 30 years of data, there's really no correlation, there's no impact of housing prices on consumer spending. Consumer spending is principally controlled by whether the consumer is working and whether or not he or she has a good job. That is definitely the case. You look at Houston's statistics recently, Houston's created roughly 73,000 jobs in the last, in the last year, and those are high-quality good-paying jobs. The unemployment rate is at a five-year low, so you talk to retailers here in this part of the country and they are, they're doing, they're doing very well."
Newar says conditions seem to be lining up for a potentially good season for retailers.
"The decline of gasoline, you know, sort of from the $3 level post-Katrina and post- the peak in the summer, from $3 to $2, that has added, you know, as I said, $75 to $80 billion into the consumers' pocketbook nationally. And it also has given a nice boost to consumer confidence. You take a look at some of the consumer confidence surveys and they have, they have ebbed and flowed almost in lock-step with, with gasoline prices." Ed: "Are there enough new things to bring people into the stores?" "Oh sure, I mean and that's, that is, that is the magic of retail this year. I mean, Stanley Marcus years ago said ‘look, what you want to do is you want to create excitement. You want to bring the customer into the store and you want to give them an exciting experience for which they are willing to pay.' Sony with the Play Station, and now Nintendo with the Wei, they're all creating excitement together to create an experience for the customer in the store, and if that experience is a positive beneficial experience they will not have to use price to attract, to attract customers in. If retailers end up having a decent sell-through in the pre-Christmas phase, that means they will have very lean inventories and be selling merchandise at full price or at higher margin price in the post-Christmas phase when all those gift cards come back in."
The Galleria, Willowbrook Mall, Baybrook Mall, Deerbrook Mall in Humble, First Colony Mall in Sugar Land and The Woodlands Mall will all open their doors at 5 a.m. tomorrow so that retailers can open by 6 a.m. So far, retail giants like Wal-Mart are resisting the urge to pull an all-nighter. But some chains are open on Thanksgiving Day for the first time. They include BJ's Wholesale, as well as CompUSA, the latter of which will open from 9 p.m. until midnight in many states.