Sunday, November 30, 2008

Consumers Cautious As They Head Into Holiday Season—But It Is 5 o’clock Somewhere on Wall Street

Sources: Financial Times, Wall Street Drowns Its Sorrows; Financial Times, Black Friday Sales Suggest Longer Stay in Red; Financial Times, US Shoppers Brave Downturn on Black Friday; Washington Post, Hopes for Bargains Dim on Black Friday

The day that has long symbolized the beginning of the Christmas-shopping season and put retailers’ balance sheets on the positive side (or “in the black”) had a different tone this year. Across the country, stores offering deep discounts, such as Wal Mart and Target, brought out throngs of shoppers eager to get high-priced items for cheap. But the tone was different at New York’s high-end luxury stores, such as Tiffany & Co. and Bergdorf Goodman, where business was calm and streets remained clear of lines and crowds.

Retail consultants said preliminary reports from the biggest shopping day in the United States indicate that shoppers were focusing on buying the basics, rather than luxuries, and hunting for discounts. Retailers offered unprecedented discounts on merchandise, hoping to lure more customers into their stores. Many retailers are predicting that their sales will decline this year—partly from a decline in consumer spending and partly from price cuts intended to lure shoppers to stores.

While retailers across the country are fretting, restaurateurs in New York City are noticing that the wine is flowing like water for the City’s businessmen and women. New York City’s top dining spots say they are seeing an increase in alcohol sales between nine and twenty percent. Hard liquor and medium-priced wine sales contribute to the increase in sales. Restaurant managers don’t know whether to attribute the increase to a desire to feel “numb” towards the financial climate or to a desire to take advantage of “the last year of the expense account.”

Questions for Discussion:

1) What do you think is contributing to an increase in alcohol sales among businesspeople in New York City? Is this true across the country or only in New York?

2) Are businesses doing themselves a disservice when they offer deep discounts on their merchandise? Is it economical to get consumers in the stores spending money they might not have to spend in the first place?

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