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Economic Slowdown Affects US Retailers - 2001-11-20

This is the holiday shopping season in the United States, the time when U.S. retailers usually make anywhere from 50 to 75 percent of their annual profits. But with the country in the midst of an economic slowdown and the nation pre-occupied with terrorism and its aftermath, this year is much better for buyers than for sellers.

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Such bargain offers usually come at the very end of the year, as merchants make last minute attempts to get rid of inventory. This year they preceded the beginning of the holiday shopping season.

Purdue University retailing Professor Richard Feinberg says that is because this year is unlike any other year. "It's very hard to be in a good spending mood when all you hear about is how bad the economy is, and you are hearing about war issues, and you are worried about that," he said. "Two thirds of the economy is consumer driven, and so if consumers don't spend, manufacturers don't manufacture. The consumer is the key to the whole thing. "

Because consumer spending is so important, marketer Jim Lustenader says, retailers are willing to offer early bargains that cut into their year-end profits, just to get the U.S. consumers into the market. "There's quite a bit of nervousness that, if there is a major consumer pull-back, the economic recovery we are looking for in 2002 won't occur," he said. "And, I think, what you are seeing now is an adjustment of retail expectations to try to get the consumers shopping again."

Aware of the delicate psyche of the U.S. consumer in these troubled times, marketer Susan Furlong says, retailers are also exhibiting greater sensitivity to the connotations certain words may now have in advertisements in the wake of the September terrorist attacks. "We are seeing clients very carefully scrutinizing the tonality of the message, to not be too flip with the consumer, to take into consideration everyone's emotions at this point," said Susan Furlong. "The word 'missing' was in several ads that we had done, and we pulled things off the production line because 'missing' now has taken on an unfortunate new meaning."

Will the early promotions, bargain prices and nurturing advertisements meet with success? That, says Richard Feinberg, is anybody's guess. "Since so much of the consumer psyche is being driven by political events that are so far away and out of our control, something can happen tomorrow, either in a good way or a bad way, that can change everything," he said.

The only thing certain about the final tally of this holiday season, Mr. Feinberg says, is that a lot is at stake.