December 26, 2008

Pet Valu associate Alex Lodato helps Sharyn Pinto choose the treats for her seven cats' Christmas presents in Bergenfield, NJ. Pinto cutback gifts for her family so she could still spoil her pets. (Pet Pulse photo by Robin Wallace)

NEW YORK -- Balls of crumpled wrapping paper lay strewn about as sounds of discovering new toys filled American homes this week, but the holiday cheer pales to the numbers which have retailers crying "bah-humbug."

Initial reports show the holiday shopping season rung in below last year by 5.5 percent in November and 8 percent in December through Christmas Eve, according to MasterCard Inc.'s SpendingPulse division.

November's and December's drop looks slightly better when gasoline and automotive sales are excluded, bringing the fall in overall retail sales to 2.5 percent and 4 percent, respectively.

"When the economy goes bad it effects everybody, independents included," said Steve Maciontek, general manager of family operated Animal Kingdom Pet Center in Chicago.

"Sales are down 25 (percent) to 40 percent so that means poor 'Fido' is not going to get that huge present this year."

Double-digit declines from last year is the norm for 2008, according to SpendingPulse which has footwear to luxury goods posting losses of 14 percent to 35 percent.

Although a complete breakdown of holiday spending won't be known until Jan. 8, when sales results are reported by major retailers, the International Council of Shopping Centers also reports dropped numbers.

In a separate measure, the ICSC expects holiday sales to be down 1.5 percent to 2 percent from last year, reportedly making this the worst season since 1969.

"I've been here for 41 years and I've never seen it this bad, ever -- and I guess Toyota is not far behind," Maciontek said of the Japanese automaker's forecast of its first operating loss in 71 years on Monday.

"And, I take heart in that, that I am not the only one dying here."

Maciontek anticipated a down year given the concerns of his customers who wondered how they could afford to pay vet bills while managing the rest of the market's variables, even so, "it exceeded our expectation."

"But we didn't count on the weather being bad," Maciontek said of the untimely arrival of historic winter weather systems. "This is the worst weather we have seen in years, and who is going to go shopping when the weather man is telling you stay in when it is negative 35 degrees wind chill?"

Yet, Maciontek thinks the 5,000 square-foot pet store is doing better than some given his prudent foresight of not stocking any holiday-related merchandise.

Instead of taking the chance of being left with pre-made Christmas stockings stuffed with pet toys, he offered a do-it-yourself option with a 25 percent to 30 percent discount.

Seasonal items weren't the only things left off his "holiday stock list," Maciontek also skipped on the 36-inch raw hide bone that carries a price point of more than $30.

While he usually sells at least a dozen, he knew pet owners wouldn't be "looking for anything extravagant this year -- they are bare-boning it like everyone else."

In the Dog House, an upscale pet store located in the Fairmont section of Philadelphia, also saw this shopping shift.

"The amount of money that they are spending on extra things has decreased," part-owner Jenna Williams said of the boutique's sales which averaged this season at about $30, down from $40 or $50.

"Maybe two years ago, people were buying $80 to $100 dog coats and sweaters and not thinking twice about it, but not so much now."

It's the things that might be seen as less necessary "then something like a toy, which keeps a dog busy, or a treat," said Williams of what pet gifts consumers were buying this year.

Maciontek's Chicago customers also downsized their average point of sale to a mere $13 to $15, while increasing their use of credit and debit cards to 90 percent, up from last year's 50-50 split with cash.

Going along with the theme of credit and smaller purchases, the Animal Kingdom Pet Center saw more layaways than ever before.

"Maybe for a $50 or $60 purchase, they would pay a little bit a week, maybe $5 or $10," Maciontek said. "People are still going to buy for their pet, but they are not going to go all out."

Cat owner Sharyn Pinto, of Bergenfield, NJ, found a way to keep her pet gift budget the same as last year -- she cutback on gifts for herself and her husband.

Spending $150 on her seven cats, which include international show felines, she followed the trend for the practical by purchasing treats and grooming items.

While Pinto, like most Americans, is "only buying the things that we really, really need," her three-figure pet gifting is reflective of another demographic.

She, like all her friends, who are "basically doing the same thing," are pet lovers who see their furry critter family.

"People see their pets as their children," said Williams a consumer observer and pet owner. "I know I would downsize on what I spent on myself before I stopped spoiling my dog."

In fact, Williams and Pinto are in good company. Forty-one percent of pet owners said if they could only buy one gift this holiday, it would be for their pets, according to the online survey conducted by Pet Supplies Plus.

"I think the economy is suffering, there is no question about that," said Gordon Magee, Internet marketing manager for Drs. Smith and Foster. "People have to take care of certain things -- you have to eat, people have to go to work, and pets are really important to a lot of people.

"So people are being careful with their priorities, and pets are their priority."

While SpendingPulse reported online sales to be down 2 percent from last holiday, Drs. Smith and Foster, an exclusively online pet store, is "doing quite well."

"We are up from December last year, so we are quite pleased. For example, Dec. 22 of last year compared to Dec. 22 of this year, we are up 53 percent -- that's a one-day snapshot, but that gives you a pretty good idea," said Magee, who cautioned that the comparison was by date and accordingly pitted a Saturday against a Monday.

Even amid a weakened economy, the online pet retailer -- which claims to be the third largest retailer in the nation with $250 million in annual sales -- is up for the entire year.

Still, Magee says the company entered the holiday season fully aware and cautious.

Williams, and In the Dog House, also approached the "busiest shopping" months in a similar manner.

"We were definitely nervous going into this season -- we had no idea what to expect," Williams said. "I feel relieved that we did as well as last year, and with this economy, I think it would be silly to hope for much of an increase."

As some retailers skipped into the season and others limped out, there is still more holiday shopping left on the clock.

However, retailers may not want to hold their breath for a saving grace of sales and redeemed gift cards between Christmas and New Years. Earlier this week, Deloitte LLP released a consumer survey, indicating shoppers plan to spend about $151 on gift cards this season, a 24 percent drop from last year.

"There is no spirit, they are so worried about everything," said Maciontek. "They are always checking their receipts, and always asking for a better deal, and being an independent, I can do that, because I know what they are going through.

"I will give a senior citizen discount for someone who is 35."

Yet, for Maciontek the hardest part of it all is looking at the numbers "when you do everything that you are supposed to do -- give a lenient return policy, good discounts, offer a quality product -- and it still sucks."

But while economists predict Americans are in for another year of this song and dance, Maciontek hopes a generational attitude will prevail.

"I'm a Baby Boomer, and I saved up for retirement but now 30 percent of it is gone," Maciontek revealed. "I'd like to think that people are going to get fed up with this and say, 'let's go for broke, and I'll see you in hell.' "

Retailers in every sector are waiting baitedly to see if it is the economy or consumers who will make the next move -- only in time will the new year tell.

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The Associated Press and Wall Street Journal contributed to this article.