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Shopping smartly, and shopping differently

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Shifting consumers challenge retailers to keep up for the 2014 holiday season

BANGOR It is a mere matter of days before shoppers descend upon the greater Bangor area's retailers in hopes of landing that perfect holiday gift. And for the area's restaurants, hotels and stores, many hope this year's holiday shopping will be a perfect finish to what analysts say has been a lackluster year in overall consumer spending.

Despite state law that prohibits major retail stores from opening Thanksgiving Day Maine is one of three, including Massachusetts and Rhode Island stores are gearing up for the onslaught beginning at midnight on Friday, Nov. 28. From brick and mortar stores to the online landscape of virtual merchants, retailers are bracing for the annual pilgrimage of consumers looking for the door-busting deals that have become synonymous with the season. And for consumers, the trend the past few years has evolved from stalking those deals as gifts for others to more of a personal shopping trip for themselves, and taking their shopping online.

Either way, it's been a tough year for retailers, and shoppers can't get there soon enough.

According to the U.S. Department of Commerce, retail sales during the first half of 2014 were less than stellar, although consumer confidence was up and unemployment dropped half a point to 6.1 percent during the first six months of the year. Sales rose 2.9 percent in that time over the previous year off nearly a full point from Wall Street estimates and while retailers saw resurgence in spending for the back-to-school shopping season in July and August, year-over-year sales plummeted again to negative territory in September before recovering slightly in October. And sales by sector were volatile as well.

The winner? Auto sales, which are up an astounding 8.6 percent this year to date versus 2013.

The loser? Gasoline stations, where consumers and businesses alike have benefited from the nearly 30-percent drop in the barrel price of oil since June. In fact, many analysts have attributed those fuel savings to the greater bump in spending by consumers during the back-to-school shopping season, which saw the biggest increase in spending in four months.

Forget the weather

Still, the year has been volatile, and a lot of it has to do with the weather. Actually, it was a polar vortex.

Much of the country, including regions like the Midwest and Northeast, saw temperatures plummet to sub-zero conditions for weeks this past winter during the phenomenon meteorologists describe as a large-scale cyclone in the Arctic's upper atmosphere that dipped much farther south than normal. It was so cold that many companies shut their doors Macy's closed 244 stores during the worst of it canceled flights and even stopped production to weather it. The vortex, in essence, sucked profits from much of the retail sector, including auto dealers that depend on foot traffic to sell their vehicles only to find no one in their freezing parking lots.

Just last week, the entire Buffalo region came to a seven-foot-deep snowy halt, and the so-called polar vortex returned to about two-thirds of the country, sending Florida temperatures below freezing. Blame super-typhoon Nuri. The jet stream. Or just Mother Nature.

Super-typhoons and vortices aside, the holidays are upon us, and retailers need consumers to shop. And according to research analysts, they certainly will.

The National Retail Federation, the nation's largest retail trade group that conducts shopper surveys and tracks data from the U.S. Department of Commerce, said 136.9 million consumers hit stores during the two-day Thanksgiving-Black Friday span in 2013. Over the entire weekend, 248.7 million either visited a store or shopped online, an increase of half a percent from 2012. And for the entire holiday season, sales grew 3.1 percent in 2013 compared to the year earlier. With more than $50 billion in sales at stake this weekend alone, the group says total spending for the 27-day holiday season will increase again by 4.1 percent to $616.9 billion.

'Though we have only seen consumer income and spending moderately and erratically accelerate this year, we believe there is still room for optimism this holiday season,' said Jack Kleinhenz, NRF's chief economist. 'In the grand scheme of things, consumers are in a much better place than they were this time last year, and the extra spending power could very well translate into solid holiday sales growth for retailers; however, shoppers will still be deliberate with their purchases, while hunting for hard-to-pass-up bargains.'

Yet it's how sales will increase that is the caveat.

A savvier consumer

There's no doubt some retailers are worried about the strength of the economy. Just last month, shares for retail giants Amazon and Walmart took a plunge after both companies cut their sales forecasts for the holiday season amid the release of their third-quarter results, indicating the wariness retailers have as they approach the holiday season. Walmart took it a step further in saying the company would cut its capital spending in 2015 to focus more on e-commerce and smaller stores, acquiescing to the changing patterns of consumers.

Yet all is not gloomy on the retail front, and some companies have emerged as shining stars in the crowded field that will be vying for consumers come Friday. Best Buy, the nation's largest electronics retailer, surprised Wall Street last week in announcing an unexpected 2.2 percent increase in revenue in its third quarter. Citing strong sales of tablets, mobile contracts, video games and game consoles, the company is looking forward to the holiday season with a slate of deals consumers are likely to scoop up.

And according to Paul Gadoury, sales manager for Best Buy's store in Bangor, part of the effort to attract those customers is realizing they're becoming more educated before they even visit the store.

'We're going after those customers who have done their research,' he said. 'In almost all purchases they're educating themselves, and they're more educated than they've ever been. They're more knowledgeable in what they want. They're more price conscious than they've ever been.'

Similar to what the company attributed its third-quarter results, Gadoury said computers and other electronics have taken a back seat to personal connection devices that are dominating the marketplace.

'The tablets are phenomenal, and prices have come down tremendously on them,' he said. 'And it's all the personal connection stuff, the mobility connection. The shoppers that we see now have their phones on them and are checking prices as they shop. A lot of people even have a gift card or coupon that we can scan from the phone.'

The company's move to a midnight opening a few years back changed Best Buy's approach to Black Friday, and Gadoury said the shopping day is different than it used to be. Still, some of the reasons people venture out to land the best deal may not be the deals themselves, but more of a personal nature.

'It is the start to the holiday season, but the scope is different; the scale is larger. It's about buying for others, but it's also the thrill of the buy,' he said, adding many purchases may also be personal ones. 'A lot of people are building that home theater experience. They're investing in themselves. When I sit down and watch a movie or show, I want to do it in comfort.'

Changing tastes

With so many choices, making the right guesses as to what consumers are looking for is part of the game. Gadoury said health and fitness and home security have been growing categories for Best Buy, and stocking stuffers like games, movies and CDs still remain popular. But to aid their efforts to attract customers on Black Friday, he said the company is upping the ante by running two door-buster deals that day, one at its midnight opening and another at 8 a.m. Regardless of the individual deals, he feels this holiday season is poised to be a good one for shoppers.

'With gas being down and fuel oil being down, discretionary income is up right now,' he said. 'It will be a good year for the consumer.'

Similarly, Target's move to opening at midnight a few years ago hasn't changed much for store personnel as most preparations are completed before end of day on Wednesday and employees have a moment of pause Thanksgiving Day before heading back to work for the onslaught of shoppers that night.

'The majority of retailers have gone to that midnight opening,' said Dave Scott, store manager for Target in Bangor. 'Everything happens that Wednesday night so [employees] can get home and spend time with the family before they face the masses.'

What has changed for Target is their focus on shopping habits and what consumers are looking for. Scott said Target has been working to match what they think will be hot this year, and even identifying the way people shop for those items.

'A lot of what's driving footsteps and traffic is electronic, and what you're actually buying has changed too,' he said. 'It used to be computers and laptops were the big sellers. Now it's TVs, cellphones and tablets that's driving the bigger market and the bigger price points. The TVs are bigger and better, and I think most everybody is buying that TV for themselves. TVs used to be an afterthought.'

Citing other major goods like toys and clothing, sales of which have held steady over the years as families are always looking for traditional holiday gifts, Scott said the amount of hearty shoppers who line up outside his doors for those particular deals during the overnight hours has remained about the same the past few years. Although weather is sometimes a factor, consumers who brave the overnight cold are there for a reason, regardless of what the conditions are outside, including last year's freezing temperatures.

'It was definitely thermals and heavy boots last year,' he laughed.

A major change for Target this year is in response to how people are shopping. Realizing that many consumers shop from the comforts of home, Scott said the company is now offering the option to buy in-store inventory via Target's website, and store personnel will pull it off the floor and hold it. In addition to the growth of Target's website the past few years, he agrees with Gadoury in how people use cell phones as part of the shopping experience.

'What you're finding a lot more now is people are using mobile devices to shop,' he said. 'It then becomes what do you have on your cell phone that can help you? Do you have an app to get you a coupon or find the best deal?'

Is Black Friday dying?

This year's season adds a shopping day to the span between Thanksgiving and Christmas versus last year's 27-day season. Yet the so-called holiday creep has led many retailers to push sales earlier in November in an attempt to close the gap between results in November and December. In reality, Black Friday's sales totals represent the majority of revenue for the entire month of November for many retailers, and the day itself isn't what it used to be since some of those have shifted to Thanksgiving night in the majority of the U.S.

And it was common practice that retailers kept a tight lid on what deals they would be offering until the distribution of their inserts on Thanksgiving Day. Such proprietary information was closely guarded so that no one store or chain could gain an advantage over the other.

Oh, how things have changed.

Gone are the days when websites touting leaked Black Friday information were sprouting up all over the Internet. Today, the companies do it themselves on their own websites to help engage their customers and build excitement. You can find just about any Black Friday deal well ahead of time. And whether it's in response to consumers or has altered their behavior because of it, such information has undoubtedly distorted the holiday season's traditional buying patterns.

This year, Christmas falls on a Thursday and Super Saturday typically the second-highest day in sales for the entire season is almost a full week before. Due to the shift in consumer patterns and retailers overreaching earlier in November it's the later part of the shopping season that may prevail. In fact, some analysts expect Super Saturday to actually hold the largest single day sales totals this year since some of Black Friday's shoppers have migrated to Thanksgiving Day.

'Our numbers show over the last three years that Thursday sales are growing at a pretty rapid pace,' Bill Martin, founder of the Chicago-based retail industry traffic firm ShopperTrak, said in a press release. 'It's leaching sales from Black Friday.'

ShopperTrak estimates the largest day in both foot traffic and sales will be Super Saturday, Dec. 20. It expects Black Friday will rank second in overall sales for the season, with the day after Christmas being the second largest in foot traffic.

A changing paradigm

Adding to that is the growing amount of sales that occur online, which also threatens the notion of traditional Black Friday shopping. Cyber Monday has become popular, and the NRF's online division, Shop.org, estimates that online sales will grow 8-11 percent this year to as much as $105 billion, with a record-high 56 percent of consumers planning to shop online. In 2013, non-store holiday sales grew 8.6 percent, illustrating the inroads shopping from home has made the past few years.

With the economy making progress, consumers experiencing the lowest fuel prices in years and unemployment easing, it's easy to say things are looking up for the retail industry this holiday season. There's no doubt the deals will help, and consumers will have one of the best shopping experiences in years. Still, some of the sales retailers are looking for may have already been made, which is why retailers are still wary in their forecasts for the holiday season. Advancing sales to an earlier date span doesn't particularly grow them it just moves market timing to a different paradigm. A great example is the Car Allowance Rebate System, commonly known as Cash for Clunkers, which helped fuel record-high vehicle sales for a two-month period in 2009. While the program had other economic effects, auto sales faltered in the seven months that followed, essentially wiping out the gains realized during those two months.

Yet the holiday retail season is its own beast. Black Friday is not disappearing but may just be taking a different form. Why? In today's competitive environment where so many options exist and time is the most valuable commodity, the one who gets the consumer first wins.

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