Discounters, Dollar Stores Poised to Capture Holiday Sales

(MoneyWatch)  Although many retailers began their holiday campaigns weeks ago in a bid to boost sales, wary and cash-strapped consumers are likely to throw a wrench into those plans.

Sure, most shoppers are planning to spend less on gifts this year -- no surprise given the down economy -- but they're also planning on deploying their shrunken holiday budgets more frugally. Roughly 68 percent of consumers say the dismal economy will change the way they shop, according to Deloitte's 23rd Annual Holiday Survey. Discount department stores, in fact, are expected to be the most popular destinations of the season.

About 73 percent of consumers said they'll select retailers that offer them the best value, while 72 percent of respondents said they plan to make shopping decisions based on low prices. Convenient location, quality, selection of merchandise, and customer service all matter less to shoppers this year. In addition, more Americans are adding warehouse clubs, dollar stores, and outlet stores to their shopping itineraries.

And although about 59 percent of Americans plans to curtail their holiday budget, they named higher food and energy prices as the top two reasons for spending less, beating out the dire economy and job uncertainty. About 11 percent of consumers are also still paying off holiday debt from last year -- not good news for the retail industry.

I talked with Scott Krugman, a spokesman for the National Retail Federation, for some advice on dealing with the down economy.

"It all revolves around inventory levels," he says, adding that the retailers with the least amount of overstock at the end of the season will be best equipped to weather the coming months. He also suggests integrating a variety of commerce channels. Retailers benefit from cross-promoting their Web sites and their brick-and-mortar stores, he says, since many retailers now let customers buy items online and then pick them up at store locations. Also increasingly popular: Sites offering customers the ability to track inventory online so they know they'll find what they're looking for before they set foot in a store.