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Home channel retailers are doing what they can to lift holiday sales, while projections from retail analysts are decidedly short on holiday cheer.
According to the annual holiday survey from Deloitte—the international consulting and financial advisory firm—consumers nationwide are expected to spend an average of $426 in the home improvement category this holiday season, down from $474 in 2006. Further, spending in the home and holiday furnishings category is projected at $94, down from last year’s $115.
“Going into this holiday season, people are more cautious, whether it’s attributed to fuel prices, stock market volatility or home prices,” said Stacy Janiak, vice chairman and U.S. retail leader for Deloitte and Touche USA. “With regard to the home channel, it’s all tied into the housing market, and with the decline in home sales and the trips to the home centers that usually go along with that, we don’t see as much spending going on.”
Home Depot and Lowe’s—both of which reduced their profit outlooks as they reported declines in the third quarter—are trying to reverse the trend by attracting more customers this holiday season. The boxes are using TV ads, circulars, direct marketing and online alerts to make shoppers aware of in-store clinics, longer store hours and in-store specials.
“We’re seeing home retailers trying to compensate for lack of projected spending by offering something to get people into the stores,” Janiak said. “If you get people in, they tend to purchase more than they intended to.”
Shilpa Bharne Rosenberry, senior consultant with WSL Strategic Retail, agreed that the home category has been hit hard by the weak housing market and will continue to be soft during this holiday season.
“With the rise of home heating prices and the mortgage rate concerns, shoppers anticipate cutting back on many categories—including home,” she said. “It’s a season of mindset over matter, as shoppers feel very unsettled about what the year-end will look like for them financially and emotionally.”
WSL’s recent How America Shops Pulse survey, conducted with 1,500 people across the country, revealed the following:
44 percent said they anticipated spending less overall this holiday season, compared to 39 percent in 2006, with home being among one of the hardest-hit categories.
48 percent of all shoppers—and 57 percent of women—said they plan to cut back on home decorating items.
26 percent have postponed or cut back on home improvements or redecorating such as painting, new furniture or renovations.
56 percent said they plan to spend less this year on seasonal decorations for their home.
While home improvement stores have been aggressive with promotions this holiday season, Rosenberry expects shoppers will be spending more with mass merchants, electronics specialty stores and the Internet. “These retailers have been out of the gate early, very vocal, slashing margins and offering deals that shoppers can’t ignore,” she said. “Even warehouse clubs, the likes of Costco and Sam’s, will chip away at home stores offering big ticket items at very competitive prices.
Many hardware stores have also felt the pinch this year, especially in the hardest-hit housing markets, including California, Ohio and Michigan. David Grimes, president of Handyman Ace Hardware, said overall sales in his Ohio-based stores have been flat this year, while sales of holiday trim are down 8 percent for the season.
“Gas prices are at an all-time high, the stock market is volatile and the local market—which is built around the automotive industry—has suffered,” Grimes said.
Online spending continues to climb each holiday season, and this year is on pace to continue the trend. Just like the Friday after Thanksgiving is known in the retail world as “Black Friday,” that Monday is now known in the industry as “Cyber Monday,” marking the beginning of Web-based transactions. According to the National Retail Federation (NRF), approximately 300,000 people purchased merchandise online on Cyber Monday 2006, a number that climbed to more than 1 million this year.
“Online is a great opportunity for home improvement chains to gain their share of holiday shoppers,” she said. “But the key will be making sure shoppers are reminded of home improvement stores when they think of holiday shopping and know to go to their sites.”
Do it Best has put funds into redesigning its Web site—and it seems to be paying off. Sales through
Do it Best also stepped up its e-mail marketing campaign, search engine placement and its presence on shopping comparison Web sites. About 70,000 products—many of them unique, or “oddity items,” as Schmelz calls them—have helped the site develop a niche. In fact, at press time, sales through
Schmelz attributes the rise to several factors, including the fact that the shopping season started a week earlier this year, and that pricing on
In addition, the average sale on
“This has allowed us to sell large items like riding lawn mowers, even sheds, which brings the average ticket up,” Schmelz said.