It may not be happy holidays for the retail industry overall. But the Web should provide one bit of good cheer.
Retail sales will probably be flat this holiday season, but online sales are expected to reach $44.7 billion, an 8 percent jump over last year, according to the latest data from Forrester Research.
Among 4,000 online consumers surveyed, 94 percent have made a purchase online in the past three months and plan to do the same for the holidays. As for retailers, 72 percent of those questioned for the third-quarter Forrester report "The State of Retailing Online," said they expect holiday sales to increase over last year.
But to cope with the down economy, online stores will try to weigh customer demand against the need to boost profits, says the Forrester report "US Online Holiday Retail Forecast, 2009," released Monday.
"Despite the lingering effects of the recession, the online space remains the retail industry's growth engine," said Sucharita Mulpuru, Forrester Research vice president and principal analyst, in a statement. "What's different this holiday from past years is that online retailers will manage to the bottom line, which will change some of the tactics they have employed in the past."
Retailers on the Web will offer sales and discounts as always, but of a more limited time and quantity. Automatic free shipping may be jettisoned in favor of free shipping only above certain price levels, says Forrester.
To drive business, online sellers may also take advantage of new trends. More detailed product information will be available, as will social networking tools that let customers share purchasing advice with friends and family.
"Tighter offline inventories may benefit the online channel as consumers go to the Web looking for products--and prices--they can't find in stores this holiday," said Mulpuru. "Online retailers will be ready for them with a special focus this year on engagement and service."
Circuit City Stores announced Monday it plans to close 155 stores and lay off 17 percent of its workforce in the U.S., as it aims to restructure its business amid a tightening credit market and downturn in business.
Over the past few weeks, the retailer's financial health has become more dire and, according to a report in The Wall Street Journal, was considering restructuring moves as a means to avoid a Chapter 11 reorganization bankruptcy filing.
(Credit:
Circuit City Stores / Richard Cadan Photography)
The struggling electronics retailer noted in its announcement that not only have its sales dropped amid an economic slowdown and loss in consumer confidence, but also its suppliers have begun cutting back on the level of credit they are extending to the retailer.
"The current mix of terms and credit availability is becoming unmanageable for the company," Circuit City noted in its announcement.
That cutback by suppliers comes at a critical time for Circuit City, as it heads into the holiday buying season when it wants to replenish its stock with the popular items.
The company plans to begin a liquidation sale at its 155 stores targeted for closing (PDF) on Wednesday and is expected to continue the sale through the rest of the year.
Circuit City also plans to scale back plans to open new stores to two from 12 in the current fiscal year and suspend all store openings for 2010. The company will continue to operate in 153 U.S. markets and overseas, but will be exiting 12 U.S. markets as a result of the restructuring.
Other woes for Circuit City include a potential delisting of its stock from the New York Stock Exchange. Last week, the NYSE warned the company its stock price had fallen below $1 for 30 consecutive trading days, a trigger point for a potential delisting.
The NYSE warned the company on Oct. 24 and Circuit City has 10 days to resolve the issue. One common means that companies use in this situation is a reverse stock split, in which investors who hold a certain number of shares can swap them for a single share in the issuer's stock. For example, 10 shares of stock trading at 50 cents each would become 1 share that trades at $5 a share.
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