Holiday shoppers waiting longer to shop

NEW YORK (CNNMoney.com) -- With just two weeks to go until Christmas the nation's retailers should be getting worried that consumers have been slow to rev up the pace of their holiday shopping, industry experts said Monday.

The trend to procrastinate doesn't bode well for merchants. The November-December shopping season fuels as much as 50 percent of sales and profits at many chains.

"What we know from our consumer survey this past weekend is that people said they have completed 36 percent of their holiday shopping so far. Last year they had completed 50 percent or more of their holiday shopping at this time," said Michael Niemira, retail economist with the International Council of Shopping Centers (ICSC).

"Generally the holiday season is progressing OK but a bit slower than usual," he added, noting the late rush could be bigger than usual due to Christmas falling on a Monday. "So that last Friday, Saturday and Sunday should be huge for retailers."

What are shoppers waiting for?

Recent consumer surveys analyzing purchase behavior cite complaints such as the inability to find hot products like T.M.X. Elmo and Sony's PS3. In some instances, consumers say they're simply turned off by poor customer service or not enough discounting.

Holiday discounts this year seem to be locked in a range between 20 to 60 percent, pretty much on par with the trend over the past two holiday seasons.

The sales trends are making some industry observers anxious.

"All gloves are off because it's do-or-die time for retailers," said Marshal Cohen, chief retail industry analyst for market research firm NPD Group.

"This past weekend was the last opportunity for merchants to follow their holiday discounts calendar as planned," Cohen said, adding that most retailers entered the important fourth-quarter selling period with their inventories in "pretty good shape."

"If their sales are on track then some retailers will continue to give sporadic discounts until Christmas. If, like Wal-Mart, they're challenged to grow sales, then the only way to get people into the stores is to get even more competitive on pricing," he said.

According to analysts, as much as 63 percent of sales that merchants log during the critical five-week holiday gift-buying marathon come in the final two weeks of the season.

For e-tailers, the heaviest shopping day of the 2006 holiday shopping period is also expected to occur this week, according to ComScore Networks.

The National Retail Federation estimates holiday sales during November-December will grow 5 percent to $457.4 billion, slower than last year's 6.1 percent increase

Despite Wal-Mart (Charts) being the first out of the gate with the most aggressive price cuts on Black Friday, the world's largest retailer failed to get the sales momentum that it sorely needed in light of ongoing sales sluggishness at its namesake stores.

In fact, November sales at its stores open at least a year - a key retail measure known as same-store sales - dipped 0.1 percent.

Cohen expects next weekend will be critical for Wal-Mart to make a last ditch effort to salvage its holiday season.

"Wal-Mart talked big but delivered little for consumers. Consumers were frustrated when they couldn't find many of its talked-about deals in its stores because of tight inventory," said Cohen.

Moreover, Wal-Mart's folly may have benefited its competitors like Target, Best Buy and Toys "R" Us, according to Britt Beemer, chairman of America's Research Group (ARG).

According to the latest survey of consumers, fewer shoppers visited Wal-Mart this past weekend compared with a year earlier, while more shoppers headed to Target (Charts), Best Buy (Charts), Toys R Us and J.C. Penney (Charts).

ARG surveyed 800 adults over the weekend.

"No retailer can afford to be burdened with excess inventory post-Christmas," NPD's Cohen said. "So Wal-Mart and others who are falling behind their sales targets will go even deeper with discounts in the final week."

To that end, Wal-Mart executives recently hinted that the company may set more toy price cuts. Wal-Mart's already slashed prices on toys twice so far.

Toys "R" Us, the largest independent toy seller, quickly responded to Wal-Mart's challenge by announcing more toys price cuts at store and extended store hours.

Online holiday shopping this year is on track to hit a record, according to ComScore Networks.

During the first 38 days of the season this year, total online retail spending, excluding travel-related purchases, reached $15.6 billion, up 25 percent from a year earlier.

Amazon (Charts), Dell.com, Yahoo.com, Walmart.com and JCpenney.com are the sites with the highest online sales so far this season, according to ComScore.

"The single-biggest online consumer spending day last year was Monday, Dec. 12 with $556 million spent, but this year we've already seen seven days eclipse $600 million in spending," Gian Fulgoni, chairman of ComScore Networks, said in a statement Sunday.

ComScore expects the heaviest Web shopping will come this week, with sales near $700 million on some days as consumers race to meet shipping deadlines to ensure delivery on or ahead of Christmas.

Same-day store pick-up, Christmas Day delivery even when shopping as late as Dec. 22, and free gift cards are some of the inducements consumers can expect this week as e-tailers compete to boost sales, analysts said.

Overall holiday online spending in November and December is expected to jump 24 percent to $24.3 billion.

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Special Report: Holiday Money 2006