Supermarket operators expect modest sales gains during the holiday season, though they said they are hoping Santa is more generous than they actually anticipate.
In interviews with SN, most executives said they believe sales gains will be minimal at best because of consumer concerns with the economy, the divisiveness in Washington, D.C., and health care costs.
Frank Curci, president and chief executive officer of Tops Friendly Markets, Williamsville, N.Y., said consumers are very cautious “because of what’s going on in Washington.
“People are not totally confident about the direction of the economy, so we don’t think they’re going to go all out for the holidays as they’ve done in past years. They’re holding back to a certain extent. They will certainly spend more during the holiday season, but not as strongly as in the past.”
To counter the consumers’ general mood, Curci said Tops is promoting more aggressively this year “to keep customers excited and to have a reason to come into the stores.”
It’s also using Facebook, Twitter and other social media more actively, with unique offers “that give customers extra values that aren’t available in our weekly ads,” Curci said.
Randy Edeker, chairman and CEO of Hy-Vee Food Stores, West Des Moines, Iowa, was among the more optimistic executives contacted. “Though overall sales in 2012 were good but not great, we think our sales trends this year indicate a better holiday season is in store,” he said.
The consumer mood “is still somewhat cautious,” he added, “but consumer spending has been increasing over the last several months.”
Some of his optimism surrounds the chain’s expectations for Black Friday — the date of a Big 10 football game between the Universities of Iowa and Nebraska, of which Hy-Vee is the title sponsor for the third year. Called the Hy-Vee Heroes Game, it recognizes citizen heroes in both states and raises money for the American Red Cross.
“We’ve altered our Black Friday strategy in terms of product selection, and our sales will go into effect earlier,” Edeker said.
“We’ve also planned several new promotional events this year and will continue our strong support of community activities throughout the holiday season.”
Edeker said Hy-Vee has stepped up its mobile promotions and social media activity this year, “and that trend will be incorporated into all our holiday promotions,” though he declined to be more specific.
Ron Cook, vice president and director of marketing for Niemann Foods, Quincy, Ill., said his company is “absolutely optimistic, but we understand the consumer is still very cautious and very value-driven. That hasn’t changed for some time, and we don’t anticipate any change during the holidays.
“But the holidays are an emotional time for shoppers, and consumers usually look beyond price during that period. They want the right foods to serve to their families and friends, which rises above value, so we’ll make sure we have a range of products that appeal to that emotion.
“In fact, we count on that. People are conservative the rest of the year, but they understand how important the holidays are, and they spend more than normal.
“So we expect positive sales gains that are as good as or better than what we did last year — that’s what we’re gearing up for — but we also remain very cautious.”
Among factors causing Midwest consumers to hold back, Cook said, are concerns about layoffs by area manufacturers, “plus the economy, which continues to keep consumers cautious and in a perpetual state of honing in on their shopping skills in search of value — but dealing with that makes us better merchants,” he pointed out.
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Niemann Foods also has concerns about increased competition, Cook added. “We keep seeing more stores opening against us,” he said.
The company is focusing on the same strategies as last year, Cook said, “with a mix of fresh offerings we work hard to provide at values that add to the pressure.”
It is also ramping up its use of social media “because we see increased opportunities for expansion and reach there. We’ve put a lot of effort into energizing consumers with increased value offerings through social media, and we’re testing opportunities that arise and deploying more vendor programs geared to digital to energize our digital strategy,” Cook said.
Uncertainty on Health Care
Steve Smith, chairman and CEO of K-VA-T Food Stores, Abingdon, Va., said he expects holiday sales to be in line with sales throughout the year.
“It’s been a struggle to achieve top-line growth this year, and while we’re ahead of last year, it’s not by much, and we don’t expect the holidays to make a significant difference,” he explained.
“We had a good holiday season last year, with Christmas a little better than Thanksgiving, and we think this year will be slightly better, but only slightly.”
He cited several reasons for the company’s slow sales gains. “First there’s the economy. We still see a lot of uncertainty in some local industries, which have resulted in layoffs, and we’re not seeing people being hired back as rapidly as before, so that makes consumers cautious.
“And we don’t think the situation in Washington adds to anyone’s comfort level or gives them a good feeling about what will happen. Consumers see divisiveness and a lack of leadership from the president and Congress, and that trickles down and affects people’s psyches about how they will spend their money.
“Finally, there’s still a lot of uncertainty about Obamacare, with some people struggling to figure out what it will cost them, and others who haven’t had insurance now tasked with having to get their minds wrapped around what it’s going to cost.”
The main way K-VA-T hopes to drive holiday sales will be to leverage its fuel programs, Smith said — promoting more ways for shoppers to accumulate points to use in the stores: by offering double-discounts at its fuel centers, for example, he noted.
“The goal is to get at least one more item into each shopper’s basket, and the way we hope to do that is through the fuel programs. Promotions will be similar to last year, but the fuel tie-in will give everything a different slant,” he noted.
The company also sees more customers using social media, “and we’re continuing to get more feedback from customers talking about us on Facebook and looking for information, so we’re trying to develop social media as a bigger resource,” Smith said.
Lack of Enthusiasm
Jack Brown, chairman and CEO of Stater Bros. Markets, San Bernardino, Calif., said his company will continue to stress price and value to attract shoppers, and while he anticipates holiday sales will exceed last year’s results, “it’s not going to be by much.
“We think we’ll be up, though only slightly, because we’ve broadened our offerings, particularly in to-go departments like prepared foods, floral and bakery, and consumers are responding well to those efforts.”
According to Brown, the biggest drawback to consumers spending more freely is “the widespread lack of confidence in both parties of Congress, which has made shoppers more afraid about their financial position.”
Confusion over the Affordable Care Act will also play a negative role, he added, “because people don’t know if their insurance premiums are going to go up, so they’re going to be very guarded about the cash they would normally spend for the holidays as they opt instead to save up for wherever their insurance premiums go.
“I spend a lot of time in the stores, and where I’ve observed people in the past shopping with enthusiasm during the holidays, I don’t find a lot of enthusiasm right now.”
Brown said Stater will continue to promote the holidays with heavy use of TV, radio and print, “and we’ll also continue with an online presence because there is a growing percentage of people who like to shop that way, and we think it will continue to grow.”
Jeff Reasor, chairman and CEO of Reasor’s, Tahlequah, Okla., said he is cautiously optimistic about holiday prospects.
“I’m basically an upbeat, positive person, and I would really like to think things will boom. But realistically, I believe sales will hold — with increases in the 5% to 6% range that our stores are currently doing — and that we’ll get a little bump for the holidays.
“Given the economy, people are tending to be a little on the conservative side, so while they will spend money during the holidays, it won’t be like the discretionary spending in the 1990s. People would like to spend more, but they’re holding their cards closer to the vest to make sure they have all they need.
“It’s a more cautious approach. If there’s money left over, they may upscale a bit and spend more on a ham, but spending will be consistent with the way it’s been. They’re slowly working their way out of that attitude, but it will be a few more years until people are comfortable enough to go out and really spend like they used to.”
Reasor said his company will start promoting turkeys earlier than it has in the past. “Some competitors offer their hottest turkey prices during Thanksgiving week, but that’s usually too late to thaw them out in time. So we’re starting our turkey pricing earlier in the month.”
He also said Reasor’s is working on developing marketing programs through social media. “We already have a presence on Facebook and Twitter, but I’m not sure how effective that is, so we plan to study it.
“We plan to look at what we do and what other types of businesses do, and see how it can fit into our marketing plan.”
Optimism in Some Areas
Roger Collins, chairman and CEO of Harps Food Stores, Springdale, Ark., said he is optimistic about Harps’ holiday prospects, with expectations that sales will grow somewhere in the low single digits.
However, he said he was also optimistic going into last year’s holiday season, when sales were not as good as he expected.
Sales at Harps have been on an upswing this year, Collins said, “because the areas in which we operate, particularly northwest Arkansas, have low unemployment and people are more optimistic than in some other areas.”
Collins said he doesn’t anticipate any changes in holiday programs this year, nor does he expect to see much increase in use of social media. “We run some digital coupons, but online is not a significant part of our business,” he said.
Mark Skogen, president and CEO of Festival Foods, Onalaska, Wis., said he’s anticipating a good holiday season. “In our neck of the woods, we think holiday sales will increase, similar to prior years, though not strong increases, but we still expect the holidays to be our busiest time of year.”
Festival expects to get a holiday sales boost from a replacement store scheduled to open in Kenosha, Wis., on Dec. 6, Skogen noted, though that positive impact could be undercut by competition from a new Costco that affects one of its stores in Green Bay, he pointed out.
The economy is not causing any particular problems in Wisconsin, Skogan noted. “There are a bunch of factors affecting sales, but no one thing that’s affecting more than one or two percentage points in same-store sales growth.
“If the 30-hour full-time status originally proposed for Obamacare had not been delayed, that might have caused some noticeable purchasing changes. But with the delay, there’s been no impetus for people to look for a second job.”
According to Skogen, the holiday season starts a couple of weeks earlier in Wisconsin than in other parts of the country because that’s when deer-hunting season begins, “which is as strong a sales event as Thanksgiving,” he explained. “It’s a big snack and beverage occasion, with people getting together for two- or three-day camping trips.”
Festival recently upgraded its website, which it uses to send out weekly promotional materials about what’s on sale and various in-store events. “Having reworked the site, we hope to use it more for holiday promotions,” Skogen said, “including blasts about store events and the schedule for Santa Claus visits to the stores, though it’s hard to measure what impact the online effort will have.
“But it’s an efficient, inexpensive way to get our message out, although here in the Midwest, people tend to rely on newsprint ads more than in some other parts of the country”
Various organizations that make forecasts about holiday sales among retailers in general during the holidays are predicting increases of close to 4% this year, with increasing use of social media, as concerns about the state of the economy continue.
Pam Goodfellow, director of consumer insights for Prosper Insights & Analytics, Worthington, Ohio, said consumers have had years of practice managing tight budgets “while still spending on items they need to, whether it be gifts or groceries for the family. Retailers can expect to see practical and refined attitudes about their customers this holiday season as families make thoughtful decisions about what they need to buy and what they can pass on.”
SN Data Points: Consumers See Cautious for Holidays
According to Jack Kleinhenz, chief economist for the National Retail Federation, “The economy continues to expand, albeit at an unspectacular pace. For consumers to turn out this holiday season, we need to see steady improvements in income and job growth, as well as an agreement from Washington that puts the economic recovery first.”
Matthew Shay, NRF president and CEO, said Americans are questioning “the stability of our economy, our government and their own finances. We expect consumers to set a modest budget for gifts and other holiday-related purchases as they wait and see what will become of the U.S. economy in the coming months
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