Nevada retailers are all asking the same question this year as they add the final touches to their Christmas marketing plans: “Will shoppers come?” Economic experts say the answer to that would have been a resounding “yes” prior to the September 11 terrorist attack on the World Trade Center and the Pentagon. Now, it remains unclear.
“I don’t know if anyone has a crystal ball to tell us at this point what’s going to happen in the Christmas season,” said Dick Bartholet, director of research and development for the Bureau of Business and Economic Research at the University of Nevada, Reno. “There’s no way we can predict an outcome until time passes.” Despite feelings of economic uncertainty, many retailers are forging ahead with the same strategies they’ve been mapping out for months to entice holiday shoppers — hoping optimism and traditional spending patterns prevail. The fact of the matter is, at this late stage in the economic cycle, they have little choice.
With Americans scared of their economic futures, the fear is that Nevada’s tourism-based economy will be unable to quickly recover from the drastic drop in leisure and business travel that took place in the first weeks following the attacks. With the decline in tourism, accompanied by mass layoffs in related industries, at least some Nevada businesses are due to feel the pain come Christmas. “In boom times, Nevada has been able to outstrip even the growth of the United States, which was growing very fast,” said Michael Swanson, a senior economist at Wells Fargo & Co. “However, any sector that can outgrow the overall economy can also fall much faster.” Swanson said the demographics of who will spend and who won’t at Christmas could depend on what their profession is, and how their employment future was impacted by the tragedy. “Anyone who is tied up with the airline industry or the hotel and travel industries is definitely going to want to conserve cash,” he said.
But it is not all doom and gloom for retailers during the Christmas shopping season. At the Galleria at Sunset mall in Henderson, Santa is still scheduled to arrive in time for children to have their photographs taken with him. Christmas carolers from schools and community groups will perform as they’ve done since the 130-store mall opened in 1996. And, as always, the stores will be open, and the mall is optimistic the fear-filled climate of early fall will dissipate come winter. “Our hope is that things get back to normal as quickly as possible,” said Vicki Duncan, the Galleria’s marketing director. “The holidays are going to come, and people are going to prepare for them and go out and shop.” Duncan said many of the stores in the mall typically do between 35 to 40 percent of their annual business during the Christmas season.
Like their larger counterparts, smaller independent retailers Judy and Stephen Hall, who own World of Toys located inside Meadowood Mall in Reno, are remaining optimistic about holiday sales. “When you are in the toy business, it’s pretty much a given that you will do well at Christmas time,” said Judy Hall, whose store shelves are filled with traditional toys like dolls, wooden blocks, tricycles and many items today’s parents played with as children. “We are sticking to our same schedule,” she said of their marketing plans, which have been in place since January. They include an annual doll sale the weekend before Thanksgiving and another toy sale in mid-November. “I think people want to put the unhappiness behind them for a while and show their children a nice Christmas, and that things will go on as much as possible,” Hall said.
Swanson said, at this point, any predictions made in the retail market are purely speculative, based on the history of personal consumption. Although there was a noticeable decline in personal consumption for two weeks following the September attack, he anticipates a nationwide rise during the holiday season, although not nearly what it was last year, which enjoyed a record-breaking retail season. “One of the things people forget is that we’ve had a number of years with some phenomenally good Christmas sales,” Swanson said. “If we do have softer sales, it will be from a level that was very, very high.” Swanson said in the first quarter of this year, personal consumption grew 3 percent, and it increased another 2.5 percent in the second quarter. It is expected to dwindle to about 1 percent in the third quarter and 1.2 percent in the fourth quarter.
Even national chains, like Wal-Mart Stores Inc., which has 16 Wal-Mart stores and four Sam’s Clubs in Nevada, are sticking with the same advertising tactics they had in place prior to the terrorist incident. Susanne Decker, spokeswoman for Wal-Mart, said the company plans to preview some of the year’s hottest toys, such as Harry Potter, Barbie and Hot Wheels, at in-store events. The company has scheduled its annual Charity Appeal Day, December 1, in which a portion of each store’s net sales will be donated to a local nonprofit group. “It is our policy not to speculate on future sales,” Decker said of Wal-Mart, which reported a nationwide $25.7 billion in sales over five weeks last Christmas season, an increase of 6.5 percent from the previous year. “I can say that we will be prepared for our holiday shoppers and hope to have a good season,” Decker said.
Swanson said the good news in the retail industry is that many companies had already worked off a lot of excess inventory prior to September. “Their inventory-to-sales ratio had been very, very lean in an historical sense,” Swanson said. “Fixed investment was starting to bottom out and we felt personal consumption was going to stay strong. Those things still apply.” He said he expects retailers to increase marketing this season, including offering consumers more discounts than usual.
Carrie Luckham, marketing manager for Meadows Mall in Las Vegas, said it would be inappropriate to speculate at this time about any changes the mall might make to its existing marketing plans because of uncertainty in the economy. “We all know that right now America’s will is very strong, so it still remains to be seen,” Luckham said. Meadows Mall began planning for the holiday season in June, devising strategies to bring business to the center’s 140 stores and eateries. Its plans have not changed, Luckham said. The retail center has scheduled an Evening of Giving on November 18. From 7 p.m. to 10 p.m., only people who have purchased a ticket from a participating charity will be able to shop. Free gift-wrapping, gifts with purchase and discounts are among the perks for customers, while the charities get to keep 100 percent of the profits from ticket sales.
Bartholet said he believes more and more retailers will be making decisions about sales promotions further into the season, when they can judge the scope of the economy a little better. He said consumer psychology is playing an important role right now. “In times of uncertainty, people tend to be conservative,” he said. “I think right now consumers are distracted, and they aren’t thinking much about shopping.” Bartholet said retail sales declined during the Gulf War, particularly during the Christmas season, because people wanted to stay home to watch television coverage. A similar trend has been noticed this year. He said many economists believed, prior to the terrorist incident, that moves made by the Federal Reserve were beginning to take effect and the wavering economy was starting to rebound. “I think we all need to wait and see,” Bartholet said. “This is the kind of event we can’t look at historically very easily. It is significant enough that you can’t look at the recent past to predict the future.”