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Dreaming of a cheap Christmas

  The bright “50% off” signs plastered over the windows of London’s plush new Westfield shopping centre don’t hold much sway over Helen Marlow.


“I’m going to spend less this Christmas. More for the children, less for the adults,” said the 63-year-old retired nurse, bustling empty-handed through the granite and marble splendor of Europe’s newest, and most luxurious, shopping mall. “People aren’t spending. People have lost confidence and they are really saving their money.”

Governments and retailers, fearing this attitude may be widespread as the financial crisis deters spending from the United States to Iceland, are dreaming up innovative ways to persuade people to part with cash that bankers won’t lend. Governments are giving away billions of dollars in tax cuts to put money into shoppers’ pockets.

On the bright side, for the shopper who has any cash to spare, Christmas looks like being a reasonable deal. “I’ve bought a couple of nice jackets, one of which was reduced by 40%,” said Carmen Sanchez, a shopper at Spanish clothing retailer Cortefiel, also offering discounts of up to 50% as it struggles to meet ambitious business targets set in a 2007 leveraged buyout.

The worry is consumers will simply use any extra cash to pay off debts racked up when money was easy. Sensing prices could fall yet further, some shoppers are also holding back in the hope of scooping even bigger bargains later. “My boyfriend and I are both waiting to get our Christmas presents on Boxing Day,” said Millie Trethewie, a student in Melbourne, Australia, taking a break from a shopping trip to department-store Myer and clothing group Cotton On.

A dilemma for retailers and policy-makers is that discounting is all very well if it persuades shoppers to spend. But if they are unsure of their jobs and think more cuts lie ahead, they may hold off -- precipitating deflation.


“The global economy is experiencing a classic hangover from a credit binge,” said IHS Global Insight economist Sara Johnson, who expects consumers’ priority will be to rebuild savings. IHS is forecasting world economic growth will slow from 2.7% this year to 1 percent in 2009, its lowest since 1982.

Consumer spending, which drives about two-thirds of economic growth in the United States, could slow even more sharply: the America’s Research Group predicts the first fall in US pre-Christmas holiday spending in almost a quarter of a century. “Yesterday I received my social security savings (statement) and looked at it. I’m concerned. I’m going to put more away,” said Rose Fernandez, a law enforcement worker in New Jersey, adding she had recently cleared $6,000 in credit card debt. Governments are alive to the risks.

US President-elect Barack Obama, who takes office on January 20, is working on growth-boosting package which economists predict could reach $700 billion or more, while the European Union is examining a €200 billion plan. Britain, for example, has tackled head-on the danger that consumers may save any extra cash by cutting its main sales tax, but planning to raise it again at the end of next year, in a bid to give shoppers an incentive to spend sooner rather than later.

Taiwan, meanwhile, plans to give its 23 million people a shopping voucher each worth T$ 3,600. The proposal has been well received on the streets of Taipei, though few think it will make a big difference. “I’m looking forward to it boosting my business,” said Lin, between serving customers in her small clothes shop. “It might not be worth anything to the rich, but it’ll definitely help the poor,” she added, saying she planned to use her family’s vouchers to buy a new television.


The levers of economic policy take time to move the gears of consumer spending -- time some retailers don’t have as they prepare for Christmas, which in western countries accounts for an estimated 40% of annual sales. The situation is no less challenging elsewhere.

“I have never seen customers rein in spending this sharp,” said Yasuhide Chikazawa, executive vice president in charge of merchandising at Japanese grocer Aeon Retail. Store groups from J.C. Penney in the United States to El Corte Ingles in Spain and Seiyu in Japan are cutting prices and offering promotions to lure shoppers and avoid being left with piles of unsold stock. Anxious to protect profit margins, many are looking at innovative ways of boosting custom.

British grocer J. Sainsbury, for example, has captured the mood of the times with campaigns such as “Feed Your Family for a Fiver” (five pounds) and “Switch and Save,” which encourages customers to switch from branded foods to its own cheaper -- but higher profit margin -- ranges.

In Australia, Just Jeans is tempting shoppers with a new prize in each of the five weeks before Christmas. Prizes include a car, a trip to Africa and A$15,000 cash. “Everyone’s under pressure to discount, but also to try to protect margins ... Otherwise it’ll be a…”(Reuters)