Weekend's tax-free holiday kicks off back-to-school season

About two months ago, Glenn Coker met with his fellow Dillard's store managers in Hampton Roads to brainstorm ideas that would help drag shoppers out of their economic doldrums.

In August, families would start focusing on back-to-school needs, and the month would kick off with a sales-tax holiday, which runs Friday through Sunday. Retailers hope that the tax break on clothes and school supplies will lure customers to spend more - despite high gasoline and grocery costs, housing woes and finance industry fallout - as it has in past years.

The Dillard's managers decided to hedge their bets on the tax holiday by adding other reasons for shoppers to visit the department store. Its busiest back-to-school schedule ever includes an event every weekend in August: model searches; a drawing for a backpack full of school items; a Hannah Montana and Jonas Brothers look-alike contest; a fashion show; and a mother/daughter or father/son look-alike contest. Dillard's also will offer an additional 30 percent off items already marked down, which it also did this time last year.

Unusual economic times call for unique measures, explained Coker, who manages the MacArthur Center store in Norfolk. "What we're trying to do is make our store different than our competitors," he said.

The back-to-school season accounts for a bigger slice of annual retail sales than any holiday or event outside the Christmas period, according to the National Retail Federation, the nation's largest retail industry trade group. Families will spend $51.4 billion on back-to-school purchases this year, up about $1.3 billion from its 2007 estimate, the federation projected from a recent survey, with clothes taking the largest chunk of those dollars.

To add to that spending momentum, Virginia's retail industry lobbied for and, in 2006, won an annual sales tax "holiday" during the first weekend in August. Shoppers can save the 5 percent state sales tax on clothing and shoes costing $100 or less and school supplies priced $20 or less.

Any extra traffic would help retailers this year. Families paying more for essentials, such as food and fuel, are cutting back on other spending. So far this year, many retailers have described their sales as flat or below where they were in 2007.

"People are coming in, but they're not spending the money on each transaction that they used to," Coker said. "They're buying, but they're buying less."

Wave Riding Vehicles, a purveyor of surfing gear and apparel with shops in Virginia Beach, Kitty Hawk, N.C., and Haleiwa, Hawaii, does the bulk of its business in the summer but sees another swell of sales from back-to-school shoppers later in August, said Penny McLeod, the retailer's corporate office manager.

So far this year, the Virginia Beach store's sales are holding steady after a strong 2007, while a dent in Outer Banks tourism has hurt traffic more at that store, she said. WRV recently hosted a couple of special events - including a free sausage-and-slushy day and a skateboard demonstration with several of its vendors - to "drum up people to come into the store," McLeod said.

The retailer plans to promote the tax-free weekend on its Web site and automated phone system, which customers call daily to get wave reports.

In the past two years, the tax break has been a good boost for business, McLeod said. "We're hoping it will be again."

Under state law, retailers can pay the tax on behalf of customers and save them the 5 percent on items not covered by the tax holiday.

Best Buy and Circuit City said they would apply the sales tax break to every item in their stores, as they did in 2007. WRV is considering doing the same for another year. Wal-Mart plans to offer all of its electronics, including wireless products, as well as CDs and DVDs, tax-free.

In Wal-Mart's advertising and signs for the sales tax holiday and back-to-school period, the retailer asks customers to "Do the Math" on its prices. It's a relatively hard-numbers message for difficult financial times, compared with the upbeat "Christmas in August" slogan the retailer used for the tax-free weekend in the past.

"I still have to feel that our value pricing is going to put us ahead of the game," said E.R. Anderson, a regional Wal-Mart spokeswoman based in Washington, D.C.

"We'll get a sense this weekend of how we're doing with the customer in terms of meeting her needs, meeting their pricing needs," she said.

Carolyn Shapiro, (757) 446-2270, carolyn.shapiro@pilotonline.com