Sparse crowds at malls and "50 percent off" signs at The Gap and other stores offer clues as to how this holiday season is shaping up so far: It's the most discount-driven one since the U.S. was in a deep recession. It's also the most disappointing for stores.
Sales are up 2 percent to $176.7 billion from Nov. 1 through Sunday, according to data provided to The Associated Press from store data tracker ShopperTrak. That's a slower pace than expected with days left in the season. ShopperTrak's predicts sales will rise 2.4 percent to $265 billion for the two-month stretch that's typically the busiest shopping period of the year.
The modest growth comes as the amount of discounts that stores are offering this season is up 13 percent from last year -- the highest level since 2008, according to financial services firm BMO Capital Markets, which tracks 20 clothing stores.
"The holiday season has been marginal to just OK," said Joel Bines, managing director and co-head of the retail practice at AlixPartners. "Retailers are doing anything they can to get rid of merchandise."
The data underscores how aggressive discounting has been both a blessing and a curse for retailers. Since the recession, the only way to get Americans into stores has been to flash huge discount signs in front of their faces.
But the discounting has had unintended consequences. Shoppers become immune to the deals, so retailers must offer bigger discounts to keep them coming into stores. That erodes retailers' sales since shoppers aren't buying things for regular price. It also eats away at retailers' profit margins.
Still, analysts say retailers have created a cycle of constant discounting that they'll have to continue in order to attract U.S. shoppers, many of who are still dealing with stagnant wages and rising costs for things like health care.
Andrew McSherry, who was shopping for an iPad and other gifts in Atlanta on Sunday, agrees that people are holding back even when there are big sales. McSherry, 44, pointed to the small crowds at Lenox Square Mall over the weekend as proof of that.
"The economy is bad and most people's discretionary income is getting squeezed constantly," said McSherry, who works at Verizon. "I don't see any signs of that abating."
Stores are rolling out more discounts to try to attract shoppers in the final days. The number of promotional emails that seven major retailers, including Wal-Mart and Target, sent for the 13-day period that ended Sunday was up nearly 70 percent from the same period last year, according to Market Track, which tracks discounts. (continued...)
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