Silicon Valley retailers are worried as holiday shopping season begins

In nearly 30 years as co-owner of Hicklebee's Books for children, Valerie Lewis has never had to slash prices in the weeks before Christmas.
But this year is different. The famous bookstore in San Jose's Willow Glen neighborhood is planning at least one sale, if not more, in coming weeks.
With the nation gripped in the worst financial crisis since the Great Depression, retailers like Lewis are having a hard time masking their fear.

"We'll try anything," said Lewis, who warmly greets each young customer like a grandchild. Indeed, her staff recently posted a video on YouTube to attract attention to the storied bookstore, which has been featured on the CBS "Early Show."

Up and down Willow Glen's Lincoln Avenue, dotted with small shops like Hicklebee's, business owners are nervously eyeing the trickle of customers walking through their doors.
"A restaurant owner asked me, 'Where are all the people?' " Lewis said. "No one knows what to expect. Everyone is worried. This is scary."

The holiday shopping season, which officially kicks off today, can be a make-or-break period for stores, representing as much as 40 percent of the year's total sales, according to the National Retail Federation.

"It's our bread and butter," Lewis said.
In recent years, some retailers offer what they hope are door-busting enticements during predawn openings. This year, stores are upping the ante to draw out reluctant shoppers.

The Great Mall in Milpitas, for instance, was to open at midnight Thanksgiving Day. During the first hour, the mall planned to hand out gift cards worth as much as $250 and other goodies, such as an Xbox 360. Stanford Shopping Center will give away Starbucks coffee and reusable shopping bags between 8 and 11:30 a.m. today. Gift cards worth at least $100 each will be awarded to random shoppers.

The holiday shopping season this year arrives as consumers are slamming shut their wallets. Tight credit, massive layoffs, plunging home values and plummeting consumer confidence have redefined the traditional "Black Friday" for retailers, large and small.

"Grieving Friday is what we are calling it," quipped Carmon Nicholls, Hicklebee's bookkeeper.
Earlier this week, the Commerce Department grimly reported that spending by individuals, which represents about two-thirds of the nation's economic activity, fell last quarter by $80 billion, or 3.7 percent, the most precipitous percentage drop in nearly 28 years. In October, consumer spending dropped by 1 percent, signaling that the economy could be even weaker during the fourth quarter.

"You are looking at the single greatest retail free-fall in 50 years," said Britt Beemer, retail industry analyst with America's Research Group. "I'm seeing things I've never seen before in my 29 years" as an analyst. "If you put Americans into survival mode, they can do without everything but food and gasoline. It's going to be tough."
Still, retailers like Hicklebee's could be in a better position to weather this storm than others, Beemer observed. "The guys who have done the best job building customer relations will win," he said.
The bookstore, for sure, sells more than books. In the back of the comfortably cluttered store are doors and walls covered with signatures and sketches of writers and illustrators — including J.K. Rowling, author of the "Harry Potter" books, and cartoonist Jules Feiffer — who have visited the bookstore.

Employees, some of whom have worked there for decades, are experts in children's literature. The San Jose Unified School District relies on the store to find age-appropriate books. The staff specializes in answering the desperate calls of parents on the way to a child's birthday party. "We pick out a book, wrap it and meet them in the parking lot," Lewis said.
Nonetheless, Lewis scanned her store earlier this week with concern. For this time of year, the foot traffic was light.

The handful of shoppers who poked around Tuesday morning all said they were cutting back on holiday spending. Even those who haven't lost a job are re-evaluating their old shopping habits and embracing less materialistic ways to celebrate the season.
"Buying things just doesn't feel good," said Willow Glen resident Lori Lennox, who brought her 4-year-old son, Luke, to Hicklebee's. Her family is cutting back on gift giving, she added. "It feels far more responsible."

Despite the belt-tightening, Hicklebee's may fare better than some because books and other knickknacks won't break most budgets. And then there is the welcoming ambience that makes people want to hang out in the store.
"I love this store," Lennox said. "This place makes me feel special."
Ginny Ellis, who traveled from Belmont to shop at the bookstore, left with a bag of hand puppets and other gifts for her grandchildren at a total cost of $90.
"I'm happy to spend that in a place like this," she said.
By- John Bordreau