Elissa Montas, a 30-year-old freelance writer in New York, is shopping more often at general-goods discounters, the kind of stores that peddle everything from candles to baking pans to suitcases. She's also doing her holiday shopping early so she can budget better and exploit sales. "There'll be no retail therapy for me this year," Montas says, lamenting the fact that her wardrobe won't see many additions. Instead, she's hunting bargains for two new babies in her family as she pores over discounted children's DVDs. Montas and her friends are also sharing coupons for such stores as Gap (GPS), Banana Republic, and Lord & Taylor. Those coupons have been circulating in recent days via e-mail. "It's not glamorous, but it's what's happening," she says.
Leonard Stiff, a 30-year-old chef at a catering business in Manhattan, is restraining himself from buying a new flat-screen television. He's also keeping his current mobile phone and skipping an upgrade to a 32GB Apple (AAPL) iPod Touch music player, opting to make do with a 16GB Touch. "It's a little depressing, but if you're smart now, you'll be better off in the long run," Stiff says.
A recession is typically a news story told in macroeconomic headlines: surging unemployment, decimated home values, the failure of this or that large bank, or, as on Nov. 14, the record decline in U.S. retail sales that hit in October. The Commerce Dept. reported that retail sales dropped 2.8% last month, the steepest decline in the 16 years that data have been tracked. The sales decline was led by a huge fall in auto purchases, but sales of all types of products suffered. Amid the newfound frugality (BusinessWeek, 10/9/08), retailers are preparing for what could be their worst holiday season in decades.
Fewer Christmas Gifts
Craig Von Bargen, 58, an engineering consultant for Coeur d'Alene Mines (CDE) in Walnut Creek, Calif., is also trimming where he can. Even though he feels his job isn't under threat, the grim economic climate is enough to make Von Bargen and his wife scale back. Instead of giving each other several gifts this holiday season, they've decided to make it only one or two.
In the aggregate, the changes by consumers like Montas, Stiff, and Von Bargen are having a big impact. Circuit City Stores filed bankruptcy (BusinessWeek.com, 11/10/08) on Nov. 10, beset by weak sales and suppliers who became nervous about the electronics chain's ability to pay. Two days later, healthier rival Best Buy (BBY) slashed its earnings outlook, citing "seismic" changes (BusinessWeek.com, 11/12/08) in consumer behavior that created "the most difficult climate" the company has experienced. "Consumers went into hibernation in October while concerns about the economy were at a peak," says Rosalind Wells, chief economist at the National Retail Federation. "As economic uncertainty went from bad to worse, shoppers pulled back on everything but the basics to weather the storm."
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