Rising gasoline prices will likely drive more San Diegans with less disposable income to cut back spending during the holiday shopping season, according to a pre-holiday report from Ernst & Young Consumer Trends Center.
Masa Liles, the marketing director for Fashion Valley shopping center on Friars Road in San Diego, however, still counts on strong sales.
“When people are ready to give to their families and friends, they will make the holidays a priority,” Liles said. “We’re having a banner year, sales are up for the year, and my expectation is that people will continue spending as they have all year.”
Liles declined to give sales figures.
Ernst & Young said on Sept. 20 that it expects holiday sales increases for November and December of 6 percent to 7 percent, compared with an 8.3 percent rise for the same period last year.
Aubie Goldenberg, a partner at Ernst & Young’s retail and consumer products group in Los Angeles, said mounting costs, in particular higher gasoline prices, have hit consumers with less disposable income the hardest.
As a result, “People travel shorter distances and less frequently,” Goldenberg said.
With consumers’ confidence dampened, discount retailers and big retail chains in particular, will be challenged to attract shoppers this holiday season, Goldenberg projected.
At the same time, he expects retailers selling luxury items will do very well this holiday season.
“Discount stores will be more affected than higher-end specialty luxury goods,” he said. “In Southern California, there is a significant base of higher socioeconomic consumers. Because we believe that this season will largely be driven by luxury purchasers, we expect luxury items to do very well,” he added.
Besides gold and fine jewelry, he forecasted that other luxury items, such as premium denim, velvet, flat screen televisions, DVDs, portable technology and such toys as the trampoline, Cabbage Patch Kids dolls, and Dora the Explorer and Twister games, will be hot for youngsters.
At the same time, he projected that discount stores and mass merchandisers will get an earlier start on promoting holiday items this year than last year to try to drive traffic into their stores.
“They don’t want to repeat last year where they weren’t as promotional and held prices, then missed the top line sales,” he said.
But a recent poll suggested that the dampened consumer confidence in the aftermath of Hurricane Katrina will have an impact on retail shopping all the way through Christmas.
According to the America’s Research Group, a consumer research firm in Charleston, S.C., retail traffic nationally dropped as much as 16 percent in the weekend after Labor Day, reported the
Los Angeles Times
on Sept. 21.
“The increased distribution costs due to Katrina (which struck the Gulf Coast on Aug. 29) will dampen retail margins this holiday season,” Goldenberg projected. “Though, retailers will be reluctant to pass on the costs.”
He said it remains to be seen how Southern California ports may be affected by Katrina.
While most products for distribution in Southern California come through West Coast ports that weren’t affected by Katrina, it’s possible that some West Coast ports become backlogged when shipments through the Gulf Coast are diverted.
Some people also predicted that cash donations to Hurricane Katrina relief efforts will cut into holiday spending this year.
Amy Lind, the president and owner of Basket Corner Inc. in Alpine, a small business that creates gift baskets for corporate clients, admits she’s worried about how higher gasoline prices and the Katrina effect may play out during the holiday season.
Lind says a prosperous Christmas season is critical.
“Fifty to 60 percent of our annual sales last year (which were $125,000) came from the holiday shopping season,” she said.
Last year, that translated into 700 to 900 baskets.
“We hope for the same sales this year as last year,” said Lind, who runs the business with two employees but relies on 25 seasonal workers in November and December to package such treats as chocolates, cookies and oatmeal toffees into boxes.
Lind said the courier service hasn’t passed on the costs to pay for the higher gasoline prices, but it wouldn’t surprise her.
For now, she’s hoping that such local clients as Prudential California Realty and the North Island Credit Union will continue to be in a giving mood this holiday season.