2008 is winding up as one of the worst holiday sales seasons on record. Overall sales for December declined by 4% and selected sales categories showed huge declines.
Luxury goods, once considered immune from economic turmoil, were hardest hit, with sales falling 21.2%, Including jewelry sales, the luxury sector plunged by a whopping 34.5%.
A final burst of spending retailers hoped for last weekend never came. Shopper traffic fell 27% compared with the same time last year,
No retail sector was spared. Among the biggest losers were electronics and appliances, which fell a combined 26.7% versus a 2.7% gain last year. Women’s apparel slid 22.7% compared with a 2.4% drop a year ago.
The season’s dismal results have left stores with mountains of inventory to clear
Luxury retailer Neiman Marcus Group offered 40% off already reduced merchandise. Two weeks ago, Neiman’s reported its net profit dropped 84% for its fiscal first quarter as affluent shoppers cut way back on discretionary purchases.
Circuit City holiday sales were down 50%, nearly twice what the chain had expected.
The great American spending binge is over, a victim of its own excess. A plunge in spending on luxury goods reflects the economic reality that no income class is exempt from a collapsing economy. Electronics, jewelry and apparel are the ultimate discretionary purchase and easily postponed.
The government can encourage us to spend money we don’t have but consumers have to deal with economic reality. When confronted with job losses and pay cuts, most consumers are wise enough to cut spending and increase savings.
One possible positive spin to what looks like dismal holiday sales is that the discounts offered this year were huge. If a retailer is offering goods at 50% off compared to last year and retail dollar sales are down 4%, that implies unit volume was roughly the same as last year. At the right price, the consumer will buy but is being very frugal, and big savings for consumers will mean big losses for retailers.
The sour economy is striking the one source of government financing that had been widely regarded as recession-proof: lotteries
Across the U.S., many state lotteries are reporting hefty declines, with ticket sales down nearly 10% in California
The decline in lottery sales “is an unusual phenomenon,” said John W. Kindt, a gambling critic and business professor at the University of Illinois. A big proportion of lottery tickets are bought by people with gambling problems who are likely to play more in bad economic times
In past recessions, players continued to buy tickets, but not this time, said Jack Boehm, director of the Colorado Lottery. “Now they are thinking, ‘My retirement is gone, I might lose my job, I’d better start putting money away’ — that means fewer dollars for lottery tickets.”
But Jose Torres, a disabled forklift driver who lives nearby, said that if anything, the recession has prompted him to spend a little more, maybe $2 a day instead of $1. “We need the money — we’re broke,” he said.
The ridiculous number of state sponsored gambling games reflects the states’ insatiably lust for revenue. Most studies show that a large proportion of gambling tickets are bought by those with gambling problems and lower income groups looking for that one in a billion chance to get rich. The lotteries are a tax on those least able to afford it and least able to properly budget their incomes. My advice to Mr Torres is to stop wasting $730 per year.