Where Consumers Shop Changes, but When They Do it Stays the Same

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In 1970, U.S. consumers could browse at 11,011 shopping centers, translating to 7 square feet of retail space for every man, woman and child (think phone booth). Department stores ruled the land, an upstart discounter from Bentonville, Ark., held its initial public stock offering and the precursor to the Internet was 1 year old.

By 2004, consumers had their pick of 47,718 centers, according to National Research Bureau, or 20 square feet per person (think bedroom closet). Department stores now are in retreat, Wal-Mart rules the world and online king Amazon.com today joins the blue-chip Standard & Poor's 500.

Retailers have regrouped, revamped and reorganized (as in Chapter 11) over the past 35 years, and consumers have changed where and how they shop. Remarkably, though, consumers have not dramatically changed when they shop-or how much of their budget they spend-in the biggest season of retailing, the holidays.

November and December, the traditional late-year holiday period, accounted for 19.8% of retail sales (excluding automobiles) in 1970 and 19.7% in 2004, according to American Demographics' analysis of Census Bureau data.

December's share of that two-month selling period dropped slightly to 55.1% in 2004 from 56.2% in 1970. But against the backdrop of a retailing revolution, the stability of shopping activity is testament to how little consumer-holiday-shopping patterns have changed.

Retailers are trying to jump start the season. Wal-Mart Stores began its holiday ad campaign Nov. 1 this year, several weeks early. Most malls also began decorating Nov. 1 and Santa generally clocked in Nov. 19, according to the International Council of Shopping Centers. "What we're seeing is the pounding of the kettle drums early," said Paco Underhill, a shopping-behavior expert and managing director of Envirosell, a research and consulting firm.

It makes sense for retailers to play their Santa clause. Holiday-period spending is massive-$415 billion last year, according to the National Retail Federation-but it does have its limits. So spending arguably is a zero-sum game: A dollar spent at Wal-Mart is one less available to Target, a dollar spent in November is one fewer left for December.

Retailers want to grab the money. "It is important to get a November jump on the holiday, which can provide a `cushion' for the season," said Michael Niemira, the shopping centers council's chief economist and director of research.

But retailers have been so successful in demarking the day after Thanksgiving that they are in a tough spot to change the rules. Macy's Thanksgiving Day Parade, stopping conveniently at the front door of the world's largest store, began in 1924. Consumers are conditioned to regard the next day-Black Friday, when retailers traditionally moved into the black-as the kickoff.

"We are conditioned shoppers, we are conditioned consumers, and retail has done a great job of driving bodies into stores the day after Thanksgiving," said Bill Martin, co-founder and exec VP-sales of ShopperTrak, which tracks pedestrian traffic in stores. Ironically, Mr. Martin said, Black Friday isn't very profitable since discounting is rampant.

Black Friday each year vies with the Saturday before Christmas as the biggest shopping day of the year. But December is the month of shopping, home to nine of the 10 biggest shopping days last year, according to ShopperTrak.

No matter how hard retailers try-Federated Department Stores' Macy's last week touted a "One Day Sale" as "Our biggest of the year! Lowest prices of the season!"-the real season doesn't start till Thanksgiving ends.

long odds

So buying begins only after families finish the turkey dinner. And then consumers start playing a game of chicken, betting retailers will slash prices in December. Retailers face long odds in trying to change that consumer behavior.

Some changes in holiday-shopping patterns are apparent. The final two months account for a smaller share of annual apparel sales now than in the 1970s, and holiday apparel sales have shifted a bit to November from December. Consumers are spreading apparel shopping around the calendar and away from Christmas.

The most intriguing shift has come in the catchall retail category dubbed GAFO-general merchandise (including department and discount stores), apparel, furniture (and home furnishings) and other (including electronics, appliances, books and music). These goods often end up under the Christmas tree, yet the share of annual GAFO sales that occurs in November and December has fallen in recent years (22.5% in 2004 vs. 24% in 1990), according to Census data.

What gives? Mr. Niemira said higher discounting ahead of the holiday and an increase in services as gifts account for much of that share decline.

But a third reason, he said, is a boom in gift cards. Sales of gift cards this holiday season will rise 6.6% to $18.5 billion, according to a National Retail Federation survey by BIGresearch. The survey found the average consumer will spend $88.03 on the cards, 15.6% of a typical holiday gift budget. Cards lock in business for the retailer, but they distort holiday sales since retailers don't count the revenue till a card is redeemed.

Gift cards essentially extend the holiday retail season into January. That's OK for retailers-as long as consumers aren't strictly cashing in on after-holiday discounts. Gift cards create one more obstacle to merchants' desire to record more holiday sales before Thanksgiving. But for retailers' holiday selling, better late than never.

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