Retailers, consumers and prices
What’s one way to get reluctant shoppers back into the stores? Give them a sales tax holiday — or two or three.
That’s what the National Retail Federation is urging the government to consider as part of the economic stimulus plan being debated in Washington.
“We think what this can do is to help consumers psychologically get back into the stores,” said Rachelle Bernstein, NRF vice president and tax counsel, on a call with reporters. “We are hopeful that with a national sales tax holiday, which will get a lot of attention, that it might be something to help make the consumer feel good again.”
The NRF outlined its sales tax idea in December in a letter sent to the incoming Obama administration. The trade group proposed that tax holidays be held on a national level in March, July and October 2009, each lasting 10 days. By temporarily lifting the sales tax for the three 10-day periods, the NRF said consumers could save nearly $20 billion.
According to interviews Reuters conducted with consumers across the United States over the past week, the answer seems to be that most of the extra money will be heading toward the basics — like food, fuel and credit card payments — with just a little left over for splurges.
Check out upcoming earnings and what they might say about food costs.
Food inflation is one of many factors putting pressure on U.S. consumers. (Housing, the credit crunch and soaring gasoline prices are some of the others.) But so far, big packaged food companies have been sticking to the mantra that consumers are willing to pay a little more for their wares as long as perceive they are getting a benefit in return.
Next week promises to offer snapshots on how rising food costs may be affecting consumer behavior. That’s because both Kraft, the largest North American food company, and Kellogg, the largest cereal maker, are slated to report earnings.
Kraft gave reporters a preview this week of new products they are launching, and none seemed to be geared to consumers trying to cut back on spending.
But grocery store operators seem to know that many consumers are scrambling to pay for necessities like food these days. Both Kroger and Supervalu are offering bonuses for consumers who turn their tax rebate checks onto gift cards to be used in the store. (Those rebate checks also are expected to start coming next week.)
So the question is, are things different this time around? Will the rising cost of fuel and food and an economy that might be in recession cause consumers to trade down to store brands and other cheaper alternatives?
Also in the basket:
Rising food prices are “global crisis”: U.N. chief
Charming Shoppes exploring alternatives on non-core assets
Protest-hit Carrefour cancels China sales plan
Plastic bottle scare is a boon for some (N.Y. Times)