Retailers cramped by shrinking economy

March 8, 2009 5:54:29 PM PDT
Sunday the World Bank predicted that the global economy will shrink in 2009, something that has not happened since WWII.

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The news is not much better within the United States.

A new Commerce Department report due out this week is expected to show a half a percent drop in purchases during the month of February.

In America retailers are really feeling the effects.

Circuit City was once the country's second largest consumer electronics retailer. On Sunday chain closed for good.

The final hours at one Emeryville Circuit City meant steep discounts for consumers like Arleen Reyes. That is only if they could find anything left on the empty shelves.

"Games that cost $20, $30? You're getting them for what? Two bucks?" said Reyes.

It is an end of an era. After sixty years as one of the nation's most successful electronics big box stores, the few remaining Circuit City stores in the country have closed for good.

"Honestly, I used to go to other stores because this one was kind of expensive," Ronald Renderos told ABC7 Sunday.

"It's pretty sad. But it's a sign of the times," said Oakland resident Alicia Jones.

However, another big box retailer, Walmart, is thriving despite these tough times. Last week the discount giant said sales jumped by 5.1 percent in February thanks to cash-conscious shoppers loading up on the basic necessities.

"Spend less. Save as much as you can because you don't know if you're going to lose your job, if you're going to have money to buy again tomorrow, so no whole foods right now. It's Wal-Mart," explained Arleca Smith.

In a recent statement Wal-Mart's Vice President said he believes "falling gas prices significantly boosted household disposable income in February and therefore allowed for both more trips and more spending."

"For a lot of American consumers it's gas or groceries," said consumer psychologist Kit Yarrow.

She says these days it is survival of the fittest for retailers.

"The ones that ended up leaving tended to be the ones that didn't have a very differentiated place in the minds of consumers, to stand for something really sharply."

Right now, for those doing the spending, every penny counts.

"Right now, to me, I need to keep money as much as I can and I need to think carefully before I spend money," said Doan Ta of San Diego.

While consumers seem to be spending their money at Wal-Mart these days, another big box discount chain is suffering like many other retailers out there. This week Target said sales in its stores fell by 4.1 percent last month.

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