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Deals, Deals, Deals: Hold Off on Christmas Buying

Written by Gary North on December 9, 2011

The deals are still coming. There will be more.

If you want a specific gift for someone, OK. Buy it. Save time. But if it’s just a gift in general for someone, the discounts are coming.

People have been shopping more than ever this holiday season, largely because of a flood of sales. But Americans have become so used to deep discounts in the weak economy that they expect each sale to be bigger and better than the last. That means retailers will likely have to keep slashing prices, which could hurt their bottom line.

“I think they’re going to have to continue to do the kind of ‘come on’ pricing that you saw on Black Friday,” or the day after Thanksgiving, says Alison Paul, head of consulting firm Deloitte’s U.S. retail practice.

This puts merchants at a disadvantage. Some of them make their annual profit at Christmas. But this strategy is is big trouble.

Sales are already happening. The customers are tight-fisted.

To be sure, consumers’ perceptions of deals don’t always jibe with reality. Most retailers decline to discuss their pricing strategy because of competitive reasons, but research by analysts at Jefferies & Co. and other firms found that many deals this year are as good as — if not better than — last year’s. . . .

The average discount at Best Buy on Black Friday was almost 45 percent, up from about 34 percent last year. The average discount at Wal-Mart was about 47 percent, better than last year’s average of 43 percent.

The consumers are spending more this year. “Americans spent $52.4 billion over the Thanksgiving holiday weekend, the highest total ever recorded for that period and 16 percent greater than last year, according to the National Retail Federation.”

The discontent with discounts comes at a time when many Americans are struggling with job losses and stagnant wages. Many shoppers simply have less money to spend this holiday season: The median U.S. household income was $49,445 last year, down from $50,303 two years before.

So, it’s a game of chicken. Will consumers spend before retailers cut prices?

If I were on a tight budget, I would wait.

Continue Reading on finance.yahoo.com

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