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Is Minnesota in a mood to shop?
By Bill Catlin
Minnesota Public Radio
November 21, 2001
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Retail's crucial holiday shopping season typically contributes about one quarter of a year's sales. The September terror attacks hit an already weak economy, suggesting it will be a subdued holiday shopping season overall.

Patriotic towels
Expect to see plenty of patriotic displays at retailers this holiday season, such as this stack of towels, displayed to look like the American flag.
(MPR Photo/Andrew Haeg)

At the Best Buy store in Roseville, Eric Lind is checking out the new Xbox® video game. Lind says he's not thinking about his holiday shopping yet, but he's not planning to hold back when gets to it, even though tight times have cost some jobs at his firm.

"I feel pretty comfortable, because I have been fortunate to have a good job, and so does my wife. I don't think I'm going to adjust my spending pattern much. Seems like for me, everything personally has been all right other than I know the economy's not doing that great," Lind says.

For the retail industry, a lot hangs on whether that sentiment is common.

Consumers like Lind spent more than many analysts expected in October. Automobile sales soared in large part because of generous financing from auto makers. But even excluding vehicles, sales grew a better-than-expected one percent.

University of St. Thomas marketing professor Dave Brennan says consumers may be adjusting to life after Sept. 11, and the deals on cars may have helped other retailers as well. "Zero financing for an unheard five-year period of time has loosened up the purse strings, but it's also got people out of the house, back into the retail shopping mood they weren't in prior to this time," according to Brennan.

Add these to the plus column: Lower energy prices and interest rates, home refinancings freeing up cash, and the rebound in the stock markets. Money not spent on air fares and hotels may wind up in packages under the Christmas tree. On the other hand, the U.S. economy shed nearly 700,000 jobs from August through October.

"Consumer spending is a function of one thing: jobs," says Kurt Barnard is a retail industry consultant. "While there are lots of people that still have very good jobs, they are suddenly terribly worried about the possibility that they might lose their jobs. And that is the kind of psychology that induces caution in spending."

Minnesota's economy is shedding jobs at an even faster pace than the U.S. as a whole.

But as experts debate the consumer's current mood, there appears general agreement on several things. Sales won't grow much - if at all - and discounters will fare better.

Kurt Barnard predicts chains like Wal-Mart and Minneapolis-based Target will see sales growth of as much as 4.5 percent. "That's not bad. On the other hand, we also estimate that most of your traditional department stores and specialty stores, most of them mall-based, will do anywhere between zero and minus-three percent on average," he says.

Target Corp., for example, reported sales at its Marshall Field's Department Stores dropped four percent in its fiscal third quarter. At the upscale discount Target chain, sales grew three percent in stores open at least a year.

Analysts also predict consumers will be cocooning, as explained by Darren Jackson, of Eden Prairie-based Best Buy, the number one consumer electronics retailer. "Cocooning is families staying at home, making investments in their family in the home, being together, whether that's in terms of entertainment products - TV and the like. And I think Best Buy could benefit from that," Jackson says.

Best Buy also stands to benefit from what's expected to be a banner year for video games.

"Several new platforms out there, a whole bunch of titles, and that category appears like it's going to grow about 25 percent year over year," according to Brent Rystrom, a retail industry analyst at U.S. Bancorp Piper Jaffray. "The quote we've heard in the industry is that the industry is going from its worse year ever to its best year ever in one year."

In the wake of Sept. 11, that kind of optimism is remarkable. But a rebound in many retail stocks and other indicators suggests that if overall holiday sales fail to meet this year's low expectations, the surprise just might be on the upside.

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