Dec 31, 2008 7:10 pm US/Eastern
Retailers Face Bleak 2009
(CBS News)
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Last minute holiday shoppers walk through the Manassas Mall in Manassas, Va., on Dec. 24, 2008. (File)
Karen Bleier/AFP/Getty Images
Preliminary reports show the number of shoppers who visited stores during Christmas week was down nearly five percent, and foot traffic down 16 percent. It's expected to be the first drop in holiday shopping in 40 years.
Christmas week shoppers did spend a bundle -- $8.4 billion the day after Christmas alone. But it wasn't enough to boost a season in debt, reports CBS News correspondent Michelle Miller. And the fallout for 2009 will be huge.
"It's almost like the auto industry and the airlines industry in the last cycle, where there are just too many companies chasing too few consumers," says retail analyst Burt Flickinger.
In what retail analysts call an overbuilt industry, more than 200,000 retail stores are expected to close next year. That's on top of the 160,000 that went out of business in 2008.
Most vulnerable: stores selling non-essentials like home furnishings, apparel and electronics.
"Just like shoppers have been on steroids in a 25-year shopping spree, the retailers were doing the same thing," Flickinger says.
Analysts say that market correction will breathe life into those left standing.
"The weakness of weaker players will benefit the strong players," says retail analyst Dana Telsey. "Even Bed, Bath and Beyond is benefiting from Linens and Things going away."
"Who will survive?" Miller asks.
"The strong companies will be those that have a strong brand that consumers recognize and those with a strong balance sheet," Telsey says. "The ability to have cash is key."
While November sales dropped for most retailers, discounters from Wal-Mart to Kohls posted sales gains. Other survivors: youth oriented stores like Hot Topic and American Apparel, which saw a six percent sales increase last month by knowing its customer.
"We're lucky in that our customer tends to have less economic liability," says Marsha Brady of American Apparel. "They don't own real estate. They're not likely to have a stock portfolio."
For the rest of us with more bills to pay, there's a bright side to the continuing retail shakeout. There will be fewer stores with fewer choices, but lower prices may be here to stay.
(© 2010 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)
Timeline: U.S. Credit Crunch & Financial Failures
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