Thursday, Aug. 06, 2009

Wishes for merry tax holiday

Merchants hope for busy weekend; discounts will be key, experts say

Everything from printers to ponchos will be tax-free this weekend, providing a possible boost for recession-weary retailers who haven’t seen a rush of customers in months.

Merchants say sales can rise about 25 percent over the weekend, which puts on holiday the 6 percent to 8 percent sales tax on many back-to-school items.

Economists and industry experts say it will take more than tax-free offers to get cash-strapped customers to open wallets.

“If retailers are giving incredible discounts of 40 percent, 50 percent or 60 percent and consumers can save on the sales tax too, it will work this year,” said Britt Beemer, a consumer analyst and founder of Charleston-based America’s Research Group.

“If retailers only give 30 percent off, it’s pretty anemic,” he said. “It doesn’t have the drawing power unless there is an incredible deal plus the free sales tax. Customers have to believe they are going to get a great deal.”

The National Retail Federation agrees. “Retailers will come with aggressive promotions,” said Ellen Davis, vice president of the national business organization. “The tax holiday is just an added benefit.”

South Carolina’s tax-free weekend is forecast to save shoppers about $2.5 million this year — lower than the $2.9 million average of previous years, the State Budget and Control Board said.

With the full effects of the recession roughly a year old in South Carolina, don’t be surprised if shoppers pass on higher-priced items or spending more time at mass merchants, experts said.

“People are adjusting their habits in retail shopping,” College of Charleston economist Frank Hefner said. “They will continue to go to the discount places and trade down.”

Still, like the cash for clunkers federal incentives for cars, tax holidays might generate a few sales from consumers who otherwise would sit on the sidelines.

“Consumers right now are hungry for any kind of deal,” said Don Schunk, research economist with Coastal Carolina University, said. “This year you’ll probably see a broader range of shoppers buying a broader range of items,” including gifts and other items not related to school.

Bruce Yandle, dean emeritus of Clemson University’s College of Business and Behavioral Science, expects the recession is likely to draw more crowds to stores during the sales tax holiday weekend than in the past.

“It is a bit of good news and blue sky,” he said.

The Greenville News contributed.

Get The State newspaper delivered to your home. Click here to subscribe.