Slump Brings Big Changes for Retailers : Marketing: Third successive disappointing Christmas season emphasizes need for new merchandizing, technology outlooks. Without them, many stores may disappear.

Still smarting from another disappointing Christmas, the nation’s retailers gather this week to commiserate and exchange ideas on how to cope with a consumer spending slump that may not go away.

The answer for many of these troubled businesses will be massive changes--in merchandise, technology, their whole outlook. Without such changes, industry observers say, many retailers won’t survive.

Some of the analysts say store owners can’t wait for--or count on--consumer spending to get back to where it was before the recession, despite the fact that many economists predict that spending will recover somewhat in the second half of this year.

“It’s not an issue at this point of, ‘Am I going to get . . . sales up to 3.5% from 3.0,’ ” said Harvey Braun, a retailing consultant with Deloitte & Touche.

The problem is that consumer spending patterns began to change even before the economy weakened because baby boomers--the free spenders of the 1980s--began putting money aside for retirement and college tuition for their children.

Retailers are also finding that after three straight disappointing Christmas seasons, they can no longer rely on holiday shoppers for the year-end boost they enjoyed in the past. The stores generally make half their annual sales at holiday time.

The frugal Christmas of 1991 “may be more permanent and we have to adjust to a new reality,” said Walter Loeb, a retailing consultant.

So with consumer spending uncertain, “it’s time for dramatic change,” Braun said. “You have to take a look at how every function of the business has been performed.”

In the early days of 1992, several retailers have already taken big steps to streamline, cut costs and improve their profitability.

Woolworth Corp., whose sales have slumped badly in recent months, said last week that it would close or re-form at 900 of its stores.

Sears, Roebuck & Co., which has been restructuring and repositioning for years, announced that it was bringing in a cash register system that would eliminate 7,000 jobs.

And Spiegel Inc. decided to close 17 Honeybee women’s apparel stores in the Northeast. The stores, which Spiegel bought in 1988, were poorly located and losing money.

Other retailers are expected to make similar announcements. Then there are thousands of decisions that will never be made publicly--to close or remodel stores, discontinue merchandise lines, redeploy or lay off workers, bring in new technology, change ad campaigns.

Analysts say retailers ought to follow the examples set by the nation’s largest retailer, Wal-Mart Inc., and the equally successful Dillard Department Stores Inc.

Wal-Mart and Arkansas-based Dillard are known for good service and low prices. They won their reputations--and strong sales--by being aggressive and setting new trends while other store owners took more traditional routes.

Both companies are famous for slashing their costs by installing the most advanced technology they could find. Computers keep track of inventory and sales and speed up distribution.

Dillard has “the best computer system in the business,” said Woody Whyte, a retail industry analyst with the Stephens Inc. securities firm in Little Rock, Ark.

Whyte said Dillard uses machines to do work that many retailers still delegate to back-office workers. That allows the company to shift its work force to the selling floor, improving customer service and saving money that Dillard can pass on to customers through price cuts.

Dillard and Wal-Mart also have developed close relationships with manufacturers that allow them to get the best possible prices and keep merchandise flowing to their stores.

In another aggressive move, Wal-Mart recently told manufacturers that it will deal with them directly, not through middlemen whose commissions drive up the cost of merchandise.

Whyte warned that other retailers will have to adopt similar methods if they want to survive over the next 20 years.

Dillard is a particular standout because it has been able to succeed while the rest of the department store industry loses sales to discounters. One reason for Dillard’s success is that it has virtually eliminated markdowns and sales that most department stores are known for, keeping prices consistently low.

“Customers don’t pay huge markups one day, and the next day it’s 40% off,” Whyte said.

Other department stores could make the same pricing switch, but “in a tough economy, they’re afraid about not being successful in the short run,” said Barton Weitz, a professor of marketing at the University of Florida.

Whyte agreed. Companies like R.H. Macy & Co. Inc. and Carter Hawley Hale Stores Inc., which are burdened by debt, “have to use all their money to keep the wolves away from the door,” he said.

Other, financially stronger retailers like May Department Stores Co. could change but “they’re doing things as they’ve always done,” Whyte said.

But Whyte predicted that other retailers will eventually come around.

“The general perception is that consumers are getting smarter and they refuse to be hoodwinked,” he said.

Weitz said other retailers need to improve their service to help the business grow in the long run. “If you only have lower prices . . . it’s easy for competitors to match that.”

The retailers meeting in New York this week are attending the convention of the National Retail Federation. It’s not surprising that the trade group’s theme this year is “Tough Challenges, New Strategies.”

There will be the usual rounds of cocktail parties and luncheons, but there’s no denying the somber overtones of this gathering--before they gathered, several retailers had turned into the latest casualties of the recession.

Seaman Furniture Co., which has been juggling leveraged buyout debt while sales have slumped, filed for bankruptcy court protection from its creditors and began closing 15 of its 37 stores in the Northeast.

Zale Corp. was forced into bankruptcy court by its creditors after the jeweler missed a payment to bondholders. And grocer AppleTree Markets Inc. filed for Chapter 11 protection after becoming unable to handle the debt from its leveraged buyout in 1988.