How small stores can lure holiday shoppers

Call it a customer service Christmas. Consumers are expected to rein in spending this year, and the retail climate favours big-box stores that can offer bargains. But because small retailers can't win price wars, experts say independents need to leverage their biggest advantage over the chains: personal relationships with customers and the ability to deliver superior service. With some economists predicting one of the weakest Decembers since 1991, retailers that falter could face a cold winter.

"The independent and the small business person are fighting a much steeper battle for sales in a shrinking market," says Eugene Muscat, professor of management at the University of San Francisco.

US unemployment rates reached 6.1% in August, the highest rate since 2003, and while fuel prices are down from their summer peak, consumers still face high costs for energy and other essentials. The spending boost from the summer's tax rebates has mostly petered out. With shoppers squeezed, the National Retail Federation expects year-over-year sales to rise just 2.2% for November and December, half the average rate of the last decade, the group plans to announce 23 September. [Retail estimates exclude spending on cars, gasoline, and restaurants.] TNS Retail Forward, a consulting and market research firm in Columbus, Ohio, predicts a 1.5% growth rate over the fourth quarter last year, while Deloitte Services forecasts between 2.5% and 3% from November to January over the same period last year.

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