Holiday Shoppers Wait for Sale Tags

WHEN Macy's held a one-day sale at its suburban Virginia location recently, it expected to rake in a million dollars in sales. Instead, the department store's managers counted up less than $500,000 in receipts.

The Macy's experience is part of an enduring trend troubling the retail industry: Consumers are holding back on big-ticket items and even thinking hard about smaller purchases.

The retrenchment has been particularly pronounced this holiday season, a time when many stores do as much as half their yearly business. One reason, industry experts say, is that debt-wary, value-conscious shoppers have become so accustomed to sales that they expect an even better deal around the corner. With just three shopping days left before Christmas, many power shoppers are looking forward to dramatic post-Dec. 25 price drops.

"We're seeing a lot of traffic, but not a lot of dollars," reports Stuart Womer, showroom manager at the Bethesda, Md., branch of Best Products, a national general merchandise firm. "On average, we're in $4 to $5 less, per transaction, than we did a year ago. With 5,000 transactions a week, he says, "that adds up."

Best Products was so concerned about the drop-off in sales that it surveyed its customer base and found that, more than ever before, people are ready to hold out for the ultimate bargain.

"We're gearing up real big for post-holiday sales," says a hopeful Mr. Womer. Even so, his company has devised a plan to try to move goods now and make price adjustments later. "We're trying to give buyers peace of mind by promising them that if the price of an item they purchase today drops in the next three months, we'll make good on the difference."

Sober numbers underlie the worries. Though some sales have picked up in the past week, overall purchasing for the holiday season remains lackluster.

Sales in speciality stores in national regional malls, for instance, fell 1.9 percent for the week ending Dec. 17 compared with the same week a year ago, according to the International Council of Shopping Centers.

The Tactical Retail Monitor, a newsletter that tracks consumer spending, recently revised its Christmas revenue forecast for retailers down by a full percentage point. It predicts stores will post a modest 2.5 percent gain over last year. Growth in credit-card spending is below last year, too.

Behind consumer reticence

Foul weather has hurt sales in some areas of the country. So has worry about consumer debt. But analysts say deeper forces are also at work.

Consumer insistence on value seems to be born of more profound economic issues affecting daily life such as the lack of job security for many Americans, rising costs of education and other responsibilities attached to rearing children, and the squeeze on those living on a fixed income.

"This is the age of individual responsibility," says Kathleen Gurney, chairwoman of Financial Psychology Corp. in Incline Village, Nev., an advisory firm for individuals and corporate employees. "We can no longer take for granted that our employers will provide salaries and benefits, and that we will have pensions. People are stretched out as far as they can be - with second and third jobs...."

Adding to their paycheck worries, Ms. Gurney says, are questions like: "Why did the stock market drop more than100 points this week? Is Washington going to balance the federal budget? What's going to happen tomorrow?"

Now the good news

Buyers do get good news, too. One development this week that may help allay consumer concerns is cheaper borrowing costs, promoted by the Federal Reserve's lowering by a quarter of a percentage point a key rate that influences the costs of loans for millions of Americans.

Nevertheless, Gurney says, "nothing feels stable to the consumer. We are now in the decade of value. The 1980s were a time of frivolous spending, when people used to say 'I can't afford it, but I deserve it so I am going to buy it.' " For the most part, she says, "impulse buying is a behavior of the past - these days people want to be more in control."

Demographics affect the new consumer motivations, too. Ross Goldstein, head of the San Francisco-based Generation Insights, which consults on consumer behavior for advertising agencies and their clients, notes the "bulk of the population is baby boomers who are oriented toward caring for children and have less discretionary income."

One of 3 American adults is a baby boomer. Two thirds have children under 16. Increasingly, this group is holding onto its money, Mr. Goldstein says. "The first boomers will turn 50 next year, and there's a second wave of boomers in their 30s. For the older group, the thrill of consumption is largely gone," and they're trying to make ends meet for their offspring, he says.

With employment growth slowing, retail sales may continue to be soft. Lenders are anxious and credit is more accessible, but "borrowers are constrained," says Edward Yardeni, chief economist at C.J. Lawrence, a New York investment firm. "Their debts are crushing them."

December figures from the American Bankers Association put consumer credit delinquencies at the second-highest level in 10 years. But ABA's chief economist James Chessen is surprised the numbers are not higher, given that "consumer installment credit is eating up more disposable income." He hopes it's "a sign that consumers are taking control of their finances, rather than just taking a quick break before the next holiday sale."