Retailers' lump of coal

Who knows what we did, but the facts are undeniable: Santa Claus officially put our economy on the naughty list.

This year, retailers across the board are experiencing one of the least profitable holiday shopping seasons ever. Usually these trends affect some operations more than others, but this year, almost all retailers are receiving the proverbial coal-filled stocking.

“Everybody is losing,” said Theresa Williams, director of the IU Center of Education and Research in Retailing. “When you start to see every retailer that you have public data on slipping, that’s usually a sign that it’s more than one particular store or operation.

“For example, usually apparel gets hit worse than electronics. Now both apparel and electronics are down double digits.”

Experts say, for most retailers, the holiday season accounts for at least 35 percent of annual sales, Williams said.

Even seemingly popular stores such as Target are being forced to adapt.

While it’s brand promise has been “expect more, pay less” for more than 14 years, Target isn’t ignorant to which half of that promise is more relevant this season.

“We don’t want to deviate from that promise because that’s what people expect when they come into our stores,” said Target spokesperson Hadley Barrows. “But we are focusing a little bit more on the ‘pay less’ side.”

Target’s marketing plan adapted to help shift that focus, Hadley said. Still, the bleak outlook for this season remains. In November, Target’s sales were down almost twice as far as projected.

But there is one retailer with cause to be merry.

Wal-Mart is experiencing a relatively profitable fourth quarter. In fact, its sales are higher than last year, Williams said.

“I think it’s the perception of customers in general,” Williams said. “They perceive Wal-Mart to be the lowest price, period.”

This perception might be skewed, she said. In a recent price check of 100 different products in stores across the country, Target’s average price was only seven cents more than Wal-Mart’s.

Still, Wal-Mart’s marketing strategy of highlighting discount shopping is working. The emphasis on one-stop shopping and low prices hasn’t been lost on college students, either.

“My plan is just to go to Wal-Mart,” said sophomore Derek Andrews. “I think their message is going through.”

But what about the less fortunate retailers? Inventory management and cutting costs are going to be key in minimizing the losses they experience during this season, Williams said.

“There is some leeway in looking for where they can cut costs,” she said. “Most of these companies are not at the very leanest in terms of their operations.”

While Target has not yet announced plans for any layoffs, it has being proactive in preventing further losses, Barrows said. In addition to scaling back the growth of new stores, the store also temporarily suspended its share-repurchasing program.

“Right now, we’re looking at tighter capital,” she said.