Black Friday used to be the most joyfully awaited day for the American retail sector. This year, Black Friday is more seen as just another occasion to confirm that the American consumer and the American retailer are in serious trouble. Black Friday, the day after Thanksgiving, is so called because it was traditionally the day the bottom line in the profit and loss account of retailers turned from red to black. It is expected to stay red this year, keeping everybody’s mood black.
Black Friday used to be the day when the American consumer started their holiday shopping season. It was not unusual for people to do all night vigils at the shopping center’s parking lot just so they would be among the first to enter when the stores open and have a chance to buy a two thousand dollar laptop for a few hundred dollars and many other such come-ons.
Well… I guess it really must be bad so that our very own Manny Pacquiao was photographed distributing frozen turkeys to people in Los Angeles. This Pinoy from General Santos City in Mindanao is supplying their turkey dinner to make sure some Americans won’t feel so deprived this Thanksgiving. That’s the spirit of the season from our PacMan.
Hopefully, PacMan’s gesture helps some consumers move on to catch that upbeat Christmas spirit. For everyone else, the recent announcement that the US Treasury is allocating $800 million to help ordinary consumers should do the trick. The latest bailout seeks to provide common folks access to more affordable credit through credit cards, housing loans and student loans. It is a virtual admission that the large bailouts of “too big to fail” banks are having limited impact on restarting credit flow to the real economy on Main Street.
The new initiative, bold as it might seem, is not expected to have an immediate impact. Its good tidings may not even be felt in time for Christmas. Instead, a brutal drop in consumer spending is expected to make the holiday season the bleakest in nearly two decades, the Wall Street Journal reports.
Indeed, Mahar Mangahas of SWS just passed on to our e-group the latest reading of American consumer confidence done by ABC News and the index is stuck at its lowest in 22 years of weekly polls. This is indeed, a dark sign for the so-called Black Friday... the traditional Christmas shopping kickoff is likely to be bleak black.
The ABC News Consumer Comfort Index is unchanged at -52 on its +100 to -100 scale, its third week at or below -50. Just eight percent of Americans rate the economy positively, 21-percent call it a good time to buy things and 43 percent say their personal finances are good – each near its record low individually, and matching last week’s low in aggregate.
There are other indications of the tough road ahead for retailers in their critical holiday season. In a separate ABC News poll last week, 68 percent said they planned to wait for holiday sales, 51 percent planned to spend less this year than last. Average intended spending was down sharply.
Rick MacDonald, director of investment research and analysis for Action Economics, wrote in a Business Week article that this could be the gloomiest holiday season in decades. “Somewhere, the Grinch is smiling. This holiday shopping season — specifically, the combined months of November and December — will likely produce worse year-over-year retail sales and consumer spending figures… Falling gasoline prices may provide some cushion to Christmas retailers, but likely not enough to keep this from being the ugliest sales season in decades.”
For the season, expect consumers to be more frugal, practical, and reserved than in recent years, MacDonald wrote. Assume that consumers will be worried about jobs, retirement savings, and housing values, and will target lower price points. Stores will push discounts early and aggressively to try to shore up sales early in the season.
“Consumers have initiated a powerful pullback in spending relative to income just as we are entering the holiday season, with deleveraging efforts that are well gauged by the free fall in stock prices and the collapse in various consumer confidence measures despite the usual boost associated with falling gasoline prices… Businesses are likely also deleveraging rapidly, with an associated blow to the labor market that is likely fanning household pessimism.”
What does this mean for us back here in the Philippines? What happens after Black Friday in the US could foretell the intensity of the backlash we will feel in our economy next year. If they buy significantly less electronic toys and gadgets, our semiconductor exports that are already suffering from reduced demand may get an even bigger hit in 2009. Semiconductors have been our largest exports until the crisis came around.
Our garments exports that are largely destined also for the US market will find more trouble getting new orders next year if the department stores are unable to unload their present inventory this Christmas season. Even our favorite tiangges may run out of “over runs” to sell if the big buyers don’t order as usual.
Expect an even lower level of FDI next year that impacts on job creation. It doesn’t take an Einstein to see that our unemployment problem next year will be exacerbated by all these, even without counting the OFWs whose contracts won’t be renewed or worse, their contracts shortened by their foreign employers. ABS-CBN Europe reported last week that electric utility linemen in Britain (probably pirated from Meralco) are being sent home before the expiration of their contracts because of the economic crisis.
Our government must follow the example of Singapore in being proactive about meeting the new challenges of a world economy that is going down the drain. I get nervous when I hear people say we are more or less insulated from the negative impact of the global financial crisis. They seem to be saying there is no need to worry. That’s plainly whistling in the dark, hoping for the best and unprepared for the worse.
Will bahala na be enough this time around?
Plantation Bay
Meanwhile, for something a lot more positive… I just got word that in the November issue of Conde Nast Traveler, Plantation Bay Resort & Spa in Cebu was named #16 among the top 25 resorts in all of Asia, the only Philippine resort on the list. It scored 90 points. The points are based on readers’ votes on criteria like location, design, service, food, and amenities. Plantation Bay is an all-Filipino entrepreneurial venture led by former investment banker Manny Gonzalez.
The higher-scoring resorts in Asia included several Four Seasons, Oberoi Vanyavillas, Banyan Tree Lijiang, and Marriott Phuket. On the other hand, Plantation Bay beat out several other Four Seasons, Oberoi Bali, the Ritz-Carlton Bali, Amanpuri, Datai Langkawi, and Banyan Tree Phuket.
Looking at other continents, only three resorts in the entire Caribbean had a higher score than Plantation Bay’s score of 90, five resorts in all of Hawaii, five resorts in all of Europe, and 37 resorts in the entire US-Canada-Mexico-Latin America.
Among the world-renowned resorts that garnered a lower score than Plantation Bay were: Parrot Cay (Turks & Caicos, Caribbean, 85.8 points); Sandy Lane (Barbados, Caribbean, 85.9); The Lodge at Pebble Beach (California, 89.9); The Phoenician (Arizona, 89.2); The Breakers (Palm Beach, 87.3); The Greenbrier (West Virginia, 86.3); San Ysidro Ranch (California, 85.4); Amangani (Jackson Hole, 85.2); Fairmont Lake Louise (Alberta, Canada, 87.9); Westin Mont Tremblant (Canada, 83.5); Hyatt Regency Maui (Hawaii, 84.2); Gleneagles (Scotland, 89.4); Hotel du Cap-Eden-Roc (France, 89.3) and Ritz-Carlton Dubai (86.7).
The fact the Plantation Bay is not part of any multinational chain and is a 100-percent Pinoy owned and managed world class tourist destination should be a source of pride for all of us. If you want to check out how deserved this Conde Nast recognition is, you should try and get a reservation for the holiday season. I brought my family there last Christmas and from the experience, I think this international recognition they just got is well deserved.
New pledge
Max Ballesteros e-mailed from the US, what he describes as a new version of the US Pledge of Allegiance:
“I pledge allegiance to the flag of the United States of America... and to the Wall Street banks for which it stands... one market under-performing, injected with fresh capital... with liquidity at the risk of the American tax payer for the benefit of the fat cats responsible for the mess.”
Boo Chanco’s e-mail address is bchanco@gmail.com