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    Sales Crash at All Levels of Retail

    With unemployment numbers at the highest level since 1994, consumers aren't spending ahead of the holiday rush, causing retailers to heavily discount their wares.

    NEW YORK – November 10, 2008 -- Sales at the nation’s largest retailers plummeted last month, signaling the upcoming holiday season may be the weakest in decades, The New York Times reported.

    "October was every bit as bad we feared," John D. Morris, a retailing analyst with Wachovia, told the Times. "Maybe worse. October’s numbers were so disappointing, particularly in the final week, which had to leave retailers in a state of high anxiety going into the holiday season."

    The downturn hit chains across the board, from upscale and luxury chains to moderate retailers, indicating consumers at all income levels are keeping their dollars in their wallets.

    "You walk the mall and consumers look like zombies," said Morris, after visiting a mall last week. "They’re there in person, but not in spirit." Sales at luxury department store Neiman Marcus dropped nearly 28 percent in October compared with the same month last year, while sales fell 16 percent at Gap and nearly that much at Nordstrom, according to the report.

    The picture is not bleak for all retailers. Deep discounters like Wal-Mart and BJ’s Wholesale Club reported gains, the report stated.

    Consumers have many reasons to cut spending, and high on their list is weakening employment, the newspaper reported. The nation's unemployment rate reached a 14-year high of 6.5 percent in October, from 6.1 percent in September, according to a report Friday by the Labor Department. Another 240,000 jobs were cut during the month, which marked the 10th straight month of payroll reductions, according to a report by The Associated Press. So far in 2008, 1.2 million jobs have disappeared, and more than half of the decrease occurred in the past three months alone, the AP reported.

    Getting consumers to shop is proving difficult for retailers. Seven weeks before Christmas, stores are offering discounts upwards of 40 percent in an effort to move merchandise, the Times reported. New merchandise is being marked down before it hits the sales floor, and retailers are extending hours and offering "doorbuster" deals usually reserved for the day after Thanksgiving, better known as Black Friday.

    "I’ve never seen as many ‘percent off the entire store’ promotions as we’re seeing right now," said Kimberly Greenberger, a retail analyst at Citigroup who has been studying apparel sales and promotions for a decade. "What we’re hearing anecdotally from different retailers is that when they’re putting something on sale at 30 or 40 percent discount it is no longer having an effect on consumers. They’re having to cut prices 50 to 60 percent to get consumers interested."

    Wal-Mart, with sales at stores open at least a year up 2.4 percent in October, began a big discount program last week, lowering prices on thousands of food and gift items, according to the report.

    And some grocery retailers are offering food and gas discount programs to entice customers to shop. Safeway is following the lead of Giant Eagle of Pittsburgh and is offering gas discount programs, one of which includes a partnership with BP and allows customers to earn up to $1.50 toward a gasoline purchase, according to Maryland-based Gazette.net.

    "This is another opportunity to provide rewards to our customers," Craig Muckle, public affairs manager for the division, told the paper, adding this could bring in new Safeway shoppers.

    Through the program, customers get a 10 cents per gallon discount at Safeway gas stations for every $100 spent at the store, according to the report. For stores without gas stations, Safeway will provide a BP card valued at $9 for customers who spend $600 at stores, and each subsequent $100 purchase will earn customers another $1.50 discount for gas

    Another grocer, Giant Food, also hopes to cash in on the gift card season, offering 5 percent discounts on gift card purchases for both businesses and nonprofits, according to the Web site. The new program has also reduced the $1,000 purchase required for the discount to $500.

    "We've been doing a number of things to help with the rising cost of food," spokesman Jamie Miller told Gazette.net. "At a time when the average family of four now spends $8,513 per year on groceries, giving the gift of food and other essentials will likely become more popular."

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