The outlook for retailers is very modest, with analysts expecting a sales gain of only about 4% from a year ago. Even the toy industry, with no hot product to plug, is expected to see a modest 6% gain.
Price-conscious consumers will make this holiday season much more focused than a year ago, said Carl Steidtmann, director of research at Management Horizons, Price Waterhouse's retail management consultancy in Columbus, Ohio.
"We're being somewhat cautious on our outlook for Christmas," said Isaac Lagnado, principal, retail consultancy Tactical Retail Solutions, New York. "We don't see the likelihood of a yearend spree as we had last year and consumer confidence is flagging."
Trend expert Gerald Celente, director of the Trends Research Institute, Rhinebeck, N.Y., went as far to say "frugality" would surface this holiday and continue as a trend. "We are seeing the birth of a new consumer-the frugal consumer and this change has more to do with financial changes rather than philosophical changes," Mr. Celente said.
"Consumers are cautious about their spending and certainly very bargain hungry," said Judith Langer, president of Langer Associates, New York. She added that consumers would search for practicality in their gifts.
As a result, analysts predicted apparel will continue to struggle, while categories like software, consumer electronics, sporting goods and home goods will do well.
"Apparel is something you buy for an image that you want to show to others, but consumers aren't into that right now," said Bradford Fay, VP at Roper Starch Worldwide. "People are going to be looking for things to adorn their homes more than their bodies."
Because of the cautious outlook this season, retailers are looking to boost consumer interest with everything from celebrities in TV ads to mailing special holiday gift books.
Sears, Roebuck & Co. remains somewhat careful about this holiday season, predicting sales won't increase quite so much as they did last year. Sears' comparable stores sales for the fourth quarter of 1994 rose 7%.
The retailer will break its "Merry Side of Sears" TV campaign, created by Young & Rubicam on Thanksgiving Day during the ABC broadcast of "Home Alone."
Sears is betting the farm on toys this year, having mailed 9 million copies of its 200-page Wish Book in early October. The catalog was last mailed in 1992, just before Sears closed its catalog operation.
Dayton Hudson Corp. is mailing its first holiday catalog since 1990, featuring apparel and gift items. The same book will go to all of the 63 Dayton's, Hudson's, and Marshall Field's stores. The cover of the book features the cartoon reindeer Dayton Hudson is using throughout its holiday campaign, created in-house.
Dayton Hudson's Target stores will use celebrity appeal and the Walt Disney name to capture consumer's attention. The TV ads, created by HMS/Ruhr, Minneapolis, will feature Vanessa Williams singing a new version of the Disney song "It's a Small World." Target will carry the Disney theme throughout the store with Disney trip giveaways and in outdoor boards.
Troubled retailer Kmart Corp. will also use star power. Rosie O'Donnell and Penny Marshall star in 10 30-second spots that broke Nov. 12. The ads from Campbell Mithun Esty, Minneapolis, show Ms. O'Donnell touting the benefits of Kmart shopping to Ms. Marshall, highlighting such products as in-line skates, toys, and Jaclyn Smith sportswear.
Ms. O'Donnell and Ms. Marshall "are shoppers and are not endorsing Kmart as a traditional spokesperson would do," said Kenneth Watson, exec VP-marketing and product development. "We wanted to do some things that would relate directly to women in a fun, humorous way."