Last Updated Jan 7, 2010 12:35 PM EST
Vigilance is the price of bargains this holiday season.
After a grim 2008, retailers have regrouped and changed their tactics this year. Inventories are tighter, and stores are trying to maintain profits by limiting their discounts. That’s good and bad news for holiday shoppers: There will be some great deals available, but you’ll need to work a little harder to get them.
Understanding what retailers are up to will give you a decided advantage. Here are five key trends that will affect your holiday shopping this year, plus our advice for how you can capitalize on them.
1. Timing Will Matter
Don’t expect the same kind of drastic price cuts you saw last December: With the National Retail Federation forecasting that shoppers will spend 3.2 percent less than they did in last year’s dismal season, retailers have purchased less inventory for holiday 2009.
Still, price cuts are like a game of chicken: If consumers are more reluctant to spend than retailers have been to build inventory, you’ll see markdowns. That’s what Siva Kumar, the CEO of TheFind.com, a search engine that locates online coupons and promotion codes, thinks will happen. Kumar expects to see lots of discounted goods available in after-season clearances.
He says that for deal-hunting shoppers, timing is crucial. Generally, retailers try to hold prices as high as they think they can through Cyber Monday, the day after the Thanksgiving weekend. Then they re-evaluate inventories, and if they’re holding onto more than they like, they will lower prices or enhance deals. A week later, they go through the process again. That’s the second week in December, which is when Kumar says it’s time to strike: It’s early enough that you can get goods shipped to arrive before Christmas, and prices probably won’t get any lower until the post-holiday clearance sales.
Another reason that timing will be important: With retailers rolling out short-lived, targeted reductions, bargain hunting may feel like a game of Whac-A-Mole. Retailers are getting savvier about distributing electronic coupons and promotional codes, but online promotions are usually of limited duration. Hunting them down requires more time and attention than most shoppers have, so use a shopping site such as eDeals to compare prices and locate codes and coupons.
2. Customers Are Pickier
If you’ve got a slimmed-down shopping list this holiday season, you’re not alone. “The upper hand is with the consumer, there’s no doubt,” said James Russo, vice president of global consumer insights at market research giant Nielsen. “There is a whole adjustment around the holiday mind-set. It’s not always about more.”
Retailers know this — and are going to work harder to get your attention with big promotional discounts. Sears kicked off the season early, with a big “Black Friday” sale that was actually held on Halloween weekend. That put pressure on more upscale department stores: Macy’s and others responded with their own pre-Black Friday enticements. Even Nordstrom got in on the act, offering free shipping on holiday orders of $100 or more.
At the same time, however, stores are trying to avoid a repeat of last year’s pain by limiting the depth and scope of the bargains they offer. After all, free shipping isn’t exactly 60 percent off. Sears, for example, while offering 50 percent off winter coats, knocked just 20 percent off the chain’s popular Craftsman tools.
Tod Marks, a senior editor for Consumer Reports magazine, says retailers are becoming more sophisticated in their promotions. Expect to see more heavily discounted loss leaders, but sales will also have limited scope and short time frames.
How does this affect you? Because retailers are working so hard to get you to spend, you’ll need to be even more aggressive if you’re searching for bargains. Look to the Web for help: Although stopping in favorite stores regularly is one way to keep up on short-term sales, Marks says he also subscribes to retailers’ e-mail alerts, which announce special short-term discounts. Some stores are even offering mobile phone notification.
Meanwhile, visit Web sites such as eDeals.com or TheFind.com to get online promotion codes for deals that aren’t offered in stores. And because retailers want to reward their most engaged shoppers, consider signing up for a store credit card — as long as you read the terms of payment carefully and settle your charges quickly. “I see more and more discounts being dangled in front of people who use their store credit cards,” Marks said.
3. Stores Pushing Gift Cards
Here at MoneyWatch, we’re not big fans of gift cards. Drawbacks can include fees and usage restrictions, and some gift givers find them too impersonal. Yet shoppers are buying more of them than ever, said Russo. In Nielsen’s 2009 Holiday Season Forecast, shoppers in 8 percent of U.S. households planned to spend more on gift cards this holiday season — even as overall consumer sales are expected to be down from last year.
Meanwhile, retailers love them because they represent two store visits, one by the giver and another by the recipient. That’s two chances to make a sale. Even stores that aren’t normally holiday destinations — such as Northeast supermarket chain Stop & Shop — are trying to get a piece of the gift-giving action by offering not only their own cards, but also those issued by other retailers, including Bed Bath & Beyond and Macy’s.
That’s good news for you, because retailers are now sweetening the deals to make gift cards reward the gift giver as well as the recipient. One example: A recent Walmart promotion offered shoppers a $199 package deal: an Xbox 360 Arcade system (priced elsewhere at $199), plus a $100 in-store gift card for the purchaser.
4. Walmart Calls the Shots
Even if you’ve never set foot inside the big-box megaretailer, you should know what Walmart is up to — because this holiday season in particular, Walmart is calling the tune for industrywide sales and promotions. Already the world’s largest retailer, the chain has gained new customers and clout in the current downturn; now it’s using its position to launch price wars that have drawn in a range of other stores.
Just knowing what Walmart is charging — particularly for mass-market items such as music, books, and electronics — will help you make smarter shopping decisions. This year, for instance, books and DVDs have been key battlegrounds. By offering pre-orders of highly anticipated titles —books by Stephen King and movies such as Harry Potter and the Half Blood Prince — for $10 or less, Walmart has forced Amazon.com and Target to respond with like offers. Similarly, its “100 toys for $10” promotion has forced price cuts at Toys R Us and other rivals.
“Walmart came out early with the toys for below $10 this year, and everyone followed,” Russo said.
Even pricier products are feeling the Walmart effect. As part of a pre-Thanksgiving promotion, Walmart brought back a summer deal offering a Hewlett-Packard notebook computer for $298; a few days later, Best Buy promoted an Acer laptop for $249. Neither deal was designed to last long, of course, but a few smart shoppers were able to score.
5. There’s No iPhone
Last year, it was Nintendo’s Wii. The year before that, it was the iPhone. For the past few shopping seasons, there’s been a clear must-have gift item dominating Santa’s wish lists. Consumer Reports’ Marks points out that some consumers last year actually purchased their Wii systems on eBay — and paid as much as 50 percent more than the list price.
This year is different, though. No hot item is dominating the season — no Wii, no iPhone, no Tickle Me Elmo. That’s good news for shoppers, who may find they can be particularly flexible.
So, consider your holiday gift list carefully. Shoppers who avoid focusing on a particular product have a better opportunity to bargain hunt. But at the same time, said Marks, inventory-conscious retailers are more likely to let products sell out this year — so if you are determined to purchase a specific brand or item, he said, you should hit the stores early: “If you don’t, you run the risk of disappointment.”
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