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Christmas '05 won't be a piece of cake at retail.

This year's holiday selling season promises to be a particularly bruising affair.

Coming off an unexpectedly good sales performance in September, the nation's retailers would seem to have cause for optimism. With mass marketers in the forefront, 71 chain store operators tracked by the International Council of Shopping Centers posted a 4% advance in volume for the month, well ahead of the 2.4% increase they turned in a year ago.

There are, however, clouds on the horizon. The Conference Board reports that its Consumer Confidence Index dropped precipitously in September and now stands at its lowest level in almost two years. The devastation caused by Hurricanes Katrina, the rising cost of gas and heating oil, and concerns about job growth and the economy have all taken a toll.

Although the Conference Board predicts that the falloff in consumer confidence will be short-lived, with a rebound occurring by early next year, for retailers the downturn couldn't come at a worse moment. For them the outcome of the holiday selling season often defines the entire year.

Even if consumers should choose to shrug off those concerns and adopt an attitude of bon ton roulette, mass retailers will face a challenging selling environment. Many chains are already beginning to mark down prices in an effort to stimulate buying and win market share from competitors, reinforcing a pattern that has been increasingly evident in recent years. That trend is likely to become more apparent as Christmas approaches.

Wal-Mart has indicated that it intends to deliver on its low-price promise. In September Lee Scott, the discounter's president and chief executive officer, said "we are setting the pace" in pricing, a troubling thought for merchants that lack Wal-Mart's buying power and expertise in logistics and distribution.

Recalcitrant consumers and a competitive landscape dominated by pricing considerations will result in tough going for many retailers this holiday season. Only those with something special to offer--exceptional value, exclusive merchandise or an enjoyable shopping experience--will succeed in meeting the challenge.

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Author:Woldt, Jeffrey
Geographic Code:1USA
Date:Oct 17, 2005
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