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Double whammy

"Double whammy" Continued...

Issue: "2008 Daniel of the Year," Dec. 13, 2008

In recent years, the advent of widespread internet access and the practice of charities posting annual financial reports online has created a more educated and particular pool of prospective donors. Churches and individuals research potential recipients of their charity dollars with all the vigilance and savvy of consumers. "Donating to a charity is viewed like buying a car," Temme said. "People know what they want, efficiency is often a big factor, and they do their homework. It's not necessarily about the charity anymore; it's about the cause."

Still, reputation matters. The Salvation Army attracts its foundational donor base largely due to unwavering evangelical commitment and streamlined operations. During the Great Depression, the organization managed to continue serving the poor via its partnership with local churches and the willingness of affiliated pastors to open church doors and live among the homeless.

That history generates respect and name recognition, the true test of which will come at the conclusion of the Christmas season when the 128-year-old organization tabulates totals from its kettle campaign now collecting contributions at storefronts across America. As yet, strong giving has prevented any need for layoffs or the elimination of services.

But keeping up with demand is another matter altogether. "In talking with people who have been around 30 to 40 years, many are saying that this is the most significant increase in demand they've seen in their time with the Army," Temme said. "It's great that our donations, particularly with the economic downturn, are staying even if not increasing, but it does not appear they're increasing at the same rate as the demand for services. It's a big testament to Americans and their generosity that they see others in need and continue to give, in some case more than they did previously. At the same time, it may not be enough."

Some Salvation Army food banks are among those nationwide reporting that even well-stocked shelves will require an extra boost this season if they are to keep up with the lengthening lines of need. Over the Thanksgiving holiday, many food distribution centers dipped into Christmas reserves to keep from turning people away, a move that now requires donors to make up the difference.

Nevertheless, optimism among nonprofits remains high, World Vision's surprising survey perhaps contributing. "It gives hope for nonprofits," Yeager said of the poll, which Harris Interactive conducted on World Vision's behalf. "It says that there's a bigger heart out there than a lot of us believe exists."

Stores and rumors of stores

The polls told tales of squeamish shoppers. Investors redirected money away from retail chains. And online rumors swirled of massive retail layoffs, store closures, and bankruptcies.

Yet, in the early morning hours of "Black Friday," stomachs still full of turkey and pumpkin pie, shoppers formed lines outside the locked doors of their favorite merchants, eager as ever to unload piles of cash and credit on opening day of the holiday spending season. By closing time Nov. 28, consumers nationwide had dropped about $11 billion into the supposedly stagnant retail marketplace.

Estimates from ShopperTrak, a firm collecting data from some 50,000 retail locations, put in-store sales for the day at $10.6 billion, a 3 percent jump from last year's figure and 12 percent increase from 2006. Online spending accounted for another $534 million in sales, a 1 percent uptick from a year ago, according to leading digital commerce tracker comScore.

"Under these circumstances, to start off the season in this fashion is truly amazing and is a testament to the resiliency of the American consumer, and undeniably proves a willingness to spend," said ShopperTrak co-founder Bill Martin.

But one day does not a recession-buster make. Sales on Nov. 30 dipped to $6 billion, a modest drop from the $6.1 billion of 2007. The numbers have since descended further, reigniting concern that analyst predictions of an overall 10 percent drop in holiday sales this season could prove spot on.

That's bad news for many retailers hoping the December rush could halt an increasingly desperate revenue tailspin. Major national chains, including Circuit City, Linens 'n Things, and Mervyn's, have already filed bankruptcy. Others, such as Ann Taylor and Charming Shoppes Inc., the parent company of Lane Bryant, Fashion Bug, and Catherine's, are planning hundreds of store closures.

Such shutdowns stand to benefit consumers as companies seek to liquidate inventory in going-out-of-business sales. Nevertheless, many consumers are reluctant to spend amid the gloomy economy no matter the dropping price points. And internet rumors that failing stores may refuse to honor gift cards have only worsened retail prospects. A widely circulated hoax email warned that dozens of chains would close after the holidays, rendering gift cards useless.

Eddie Bauer and Ann Taylor were among those named in the email, each having since issued statements assuring customers that gift cards will remain valid. Other companies are hoping the public will see through the hoax. Even before the email surfaced, the National Retail Federation had projected gift card sales would drop 6 percent to $24.9 billion this season.

However consumers respond, massive layoffs from store closures will escalate unemployment and ultimately reduce consumer buying power. Already over the past year, about 320,000 retail employees have lost their jobs, a figure that accounts for one in four of all jobs lost over that period. National unemployment is ticking up near 7 percent and could eclipse 8 or 9 percent before a market turnaround, according to many economists.

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