Salvaging the Holiday Shopping Season Retailers across the country prepare for the worst and hope for the best.
By Dennis Romero •
Opinions expressed by Entrepreneur contributors are their own.
Georgetown Gifts, which sells cards, candles and teddy bears in Ann Arbor, Mich., is in the shivering shadow of the one of the nation's largest and most beleaguered employment sectors--the American auto industry. As you might imagine, with General Motors Corp., Ford and Chrysler suffering from dire sales, the local mood on the eve of the holidays is morose. The husband of Georgetown owner Laurie Wicks is an engineer at GM, so she senses the gloom all too well.
"It's almost paralyzing," she says. "People here are very apprehensive. We're just hoping for the best."
On that note, Wicks is putting on a happy face, offering a nearly 20 percent discount for Thanksgiving-weekend shoppers and giving everyone through the door a free holiday ornament. She's boosted marketing with ads in local publications, an e-mail blitz and a holiday open house to kick off the season. She emphasizes that retailers that show appreciation for regular customers will benefit.
"Eighty percent of your business is 20 percent of your clients," she says. "When they walk in here, I hope my customers feel they're away from the hustle and bustle."
Still, Georgetown Gifts has tightened up its holiday inventory. Some items were ordered at half their normal count, Wicks says, and higher-priced goods, such as the $50 teddy bears she once carried, are no longer on the shelf.
"I think people are still going to buy," she says, "they're just not going to spend as much. They can still come in and buy very nice gifts in the $10 to $25 price range."
Hobby Works, a chain of four stores with an online arm in suburban Washington, DC, is more bullish on the holidays. President and founder Mike Brey has boosted advertising 50 percent, increased his e-mail blasts, stocked up on inventory and initiated a tax-free sale for Thanksgiving weekend. That's on top of his regular marketing efforts, which include direct-mail offers to about 5,000 repeat customers: Recent purchasers are rewarded with gift cards worth about 3 percent of what they spent on their last visit, courtesy of the chain's point-of-sale software.
"In my business, you're talking about nearly 25 percent of your sales and a bigger percentage of your profits coming from the holidays," Brey says. "So everything you do is magnified by this season. I'm closing my eyes, plugging my ears and pulling the trigger."
With Christmas falling on a Thursday, Brey knows re-ordering inventory will be difficult if not impossible. Therefore, Hobby Works has stocked up, including purchasing goods for pennies on the dollar at area bankruptcy and going-out-of-business sales. Store staples such as train sets and remote-control airplanes are fully stocked as well. Brey says having the goods will come in handy for a shopping season that he predicts will be late breaking.
"Two weeks before Christmas you will start having big days and big weekends," he says, "and if you don't have stuff on the shelf to sell, you're not going to have the numbers."
Indeed, some sectors of retail are actually looking up for the holidays, especially as price points go down. Take Distribution Video and Audio, a DVD-movie wholesaler based in Burbank, Calif., whose clients include 99¢ Stores and K-Mart, for example. The $25-million-a-year company is booming because big-box retailers and independent shops are stocking up on its closeout titles, which often retail for $9.99 and less.
"Entertainment does well in recession because people want to get away from the stock market and the news," says DVA president Ryan Kugler. "The economy has affected us in a positive way. The retailer is looking for a deal, and when they can buy a movie from us for a buck or two, they can't go wrong."
Kugler says retailers that double down on marketing efforts when the economy goes south will survive.
"Stop watching the news," he says. "We keep cold calling potential clients and finding new accounts. Go out and offer whatever promotions you can. There are so many ways you can promote yourself. We do e-mail blasts, and we do personal letters to retailers. Just do it."
Tom Hoeck, director of marketing and sales for 3-year-old ACandyStore.com, a direct-to-consumer online retailer, seconds that emotion. The growing confectioner has had robust banner advertising, e-mail blasts, online coupon codes and direct mail appeals to its customers this holiday season. Hoeck says, "You just have to be aggressive with your marketing."
Orders are up so far this year, but the amount of candy each customer buys is down, Hoeck says. That evens out so that, at least in American candyland, it's not all doom and gloom. In fact, he says, "It's going to be business as usual."
