RETAILERS MAY RETHINK STRATEGY OF DEPENDING ON HOLIDAY SALES

BLOOMINGTON, Ind. -- The Christmas shopping season is upon us, and all economic indicators and retailers' optimism point to a strong economy at the end of this year. This could result in better-than-average holiday sales in 1997.

But an Indiana University professor says that more and more retailers are moving away from a traditional strategy that places greater importance on strong holiday-related sales in December.

Unemployment is lower than a year ago, consumers' incomes are up, the job market is healthy, and the stock market -- though off recently -- remains close to historically high levels. A National Retail Federation forecast projects that fourth-quarter sales could be up between 6 and 7 percent from last year.

"With this economic picture one would suspect that a very strong holiday season would result," observed Theresa Williams, director of the Center for Education and Research in Retailing in the Kelley School of Business at IU. "However, there has been a recent trend of some retailers to at least discuss the possibility that they will place less business emphasis on December and employ a more balanced approach among the four quarters of the year.

"It is no secret that the December pie is shrinking and that Christmas shopping may be in a permanent decline, especially in the soft lines categories," said Williams, who spent a dozen years in merchandising and management positions with three large retailers before entering academia.

Another factor influencing some retailers' decisions is the fact that they enjoyed a better-than-average first quarter in 1997, which was followed by very strong second-quarter results, Williams said.

Retail activity normally is at its lowest level during the first three months of the year, as shoppers recover from heavy spending done in connection with the gift-giving and entertaining associated with Christmas, Hanukkah and Kwanzaa.

While some retailers may rethink the sales percentage they allocate to December, this would not necessarily be an overall trend. Certain businesses, such as those specializing in the sale of toys and the scent category within cosmetics, will continue to have a major impact on December sales plans.

"But it seems reasonable to assume that if a business has suffered for most of the year, December will not be its saving grace based on an increase in store traffic alone," said Williams, who worked with Goody's Family Clothing, Miller's Department Stores and Watson's Department Stores before coming to IU in 1996 to direct the retail center.

"Retailers who have adopted an 'everyday-low price' strategy have placed emphasis on a balanced sales planning approach, and are trying to avoid the traditional peaks and valleys of sales that often occur with promoting special seasons, such as Christmas, Easter and back-to-school."

Trend sales data from 1985 through 1995 from the National Retail Federation shows that retailers have typically had one-fifth of their annual sales during the holidays.

Williams said more retailers are finding that by placing less of an emphasis on November-December sales and by spreading the percentages more evenly across the year, they reduce the risk associated with a "make-or-break month."

"With customers buying more at the time of need, spreading out their purchases, retailers could maintain steadier inventories and reduce costs," she said. "But it remains to be seen as to what retailer will be willing to step forward and plan accordingly, knowing that market share is at risk, at least in the short term."

For more information, contact George Vlahakis, Office of Communications and Marketing, 812-855-0846 or 812-855-3911, gvlahaki@indiana.edu