What Do Frugal Shoppers Mean For Economy?

MADELEINE BRAND, host:

Now, let's get a look at what's happening on the ground in the stores with retail shopping, and Howard Davidowitz is on the line now. He's a retail analyst with Davidowitz and Associates. Howard, yesterday was supposed to be a big shopping day, Columbus Day. What happened?

Mr. HOWARD DAVIDOWITZ (Retail Analyst; Davidowitz and Associates): What happened, it was a debacle. When you go in the malls, what you saw is fewer people than last year. The people that were shopping were not carrying bags, and what that tells you is the consumer is continuing to be slow. You know, in July and August, we threw little checks out of helicopters. They had little parachutes on them - $180 billion thrown out of helicopters and, by the way, back-to-school sales were still terrible in spite of that. The consumer is in survival mode and locked down.

BRAND: So you were talking about the stimulus package?

Mr. DAVIDOWITZ: Yes, ma'am.

BRAND: So locked down, and what is the forecast for the Christmas shopping season?

Mr. DAVIDOWITZ: It's going to be negative for the first time in many, many, many years. The consumer just can't spend money. Consumer bankruptcies are on the rise. Consumers have 14 trillion in debt, negative saving. They can't pay their credit card bills. They can't pay their home loans. They can't pay their auto loans. The banks are not offering financing. They've got a negative wealth effect from housing to the tune of 8 trillion. The consumer is in lock down. They just don't have money.

BRAND: Well, any bright spots out there because they do have to spend money on some things. Maybe the dollar stores are doing well?

Mr. DAVIDOWITZ: There's definite bright spots. If you're Wal-Mart, you're doing fine. If you're Costco, you're doing fine. If you're Family Dollar, you're doing fine. If you're Dollar Tree, you're doing fine.

The consumer is trading down. Starbucks closes 600 stores, but McDonalds is doing fine. Bennigans closes all their stores. Steak and Ale closes all their stores, but Burger King is booming. There is a story out there. The consumer is in major trade-down mode. If you're in position to take advantage of that, you win.

BRAND: What about hiring? Stores hire a lot of temporary workers around this time for the holiday season. What's going on there?

Mr. DAVIDOWITZ: Well, we've got 82 clients. All of them, across the board, are planning to hire fewer people and for fewer hours. Hiring is going to be way down, inventory is down, sales is down; it's all down. You know, we've lost an average of 85,000 jobs a month so far this year. Unemployment is going to skyrocket, in our view, to 7 and a half, 8 percent. All the stores have canceled expansion plans, cutting back on investments. They're not opening new stores. They're closing stores, and they're slashing hiring budgets.

BRAND: Thanks, Howard, I guess, for that grim news.

Mr. DAVIDOWITZ: Thank you.

BRAND: Howard Davidowitz with Davidowitz and Associates. Transcript provided by NPR, Copyright National Public Radio.