Amid Economic Crisis, Retailers Expect The Worst

Retailers call it Black Friday — it's supposed to be the day their businesses get into the black. But that name could take on a whole new meaning this week. Retail analyst Sucharita Mulpuru talks to host Andrea Seabrook about what this means for the overall economy.

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ANDREA SEABROOK, host:

Now, we're just five days from what retailers like to call Black Friday. That's the shopping day that businesses are supposed to go into the black. This fall, though, with the economic collapse, it's looking more like bleak Friday. To find out just how bad it might be, we turn to Sucharita Mulpuru. She's a retail analyst with Forrester Research. Welcome to the program.

Ms. SUCHARITA MULPURU (Retail Analyst, Forrester Research): Thank you.

SEABROOK: Now, the numbers look downright scary at this point. Retail sales had their worst month on record in October, down 2.8 percent from the month before. What does that mean for the holiday season?

Ms. MULPURU: Well, hopefully there is a little bit of a silver lining in the cloud. The fact that sales were as bad as they were in October hopefully means that consumers were just holding back on some spending, anticipating more sales coming in November, December. You know, consumers still, of course, need to spend, and they need to buy presents for their friends, their families, their loved ones. And that is not going to go away.

SEABROOK: It sure seems like the malls are full of sale signs, at least the ones I've been in. Are the sales different this year than in past years?

Ms. MULPURU: Well, it's not so much that the sale message is necessarily different, it's more when do those sales launch and how deep do the discounts or the promotions go? And what will happen is if a retailer is not performing as well as they would have anticipated, they'll take the same sales that they had planned on launching and then just move them up a week or two weeks. And then if that's still not helping, they'll discount even further.

SEABROOK: We just heard from the owner of a small jewelry boutique about what she worries about. And I wonder what kinds of stores are hit hardest in this kind of economy and who does well.

Ms. MULPURU: The kind of stores that are likely to do the worst are those where you have products that consumers typically would like to buy in better times - things like jewelry, very high-end luxury goods - whereas companies like Wal-Mart and the warehouse clubs are doing really well. And the reason those stores are doing really well is their message to consumers is really about price and value.

SEABROOK: Are the online companies better situated to ride this out than the brick-and-mortar stores?

Ms. MULPURU: Well, we are projecting that the online retail world, in general, should do 12 percent more sales this year than last year, compared to, say, the bricks-and-mortar stores where they'll probably do flat or negative sales. Online stores offer the opportunity for consumers to find value and price and to be able to make that transparent, so you can find the cheapest price for any item that you are looking for by just simply, you know, typing a search term into Google.

SEABROOK: Sucharita Mulpuru is an analyst with Forrester Research. Thanks very much for speaking with us.

Ms. MULPURU: Thanks, Andrea.

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