Banking on the Promotions
Using sex, cheap champagne and bargain-priced bracelets as bait, retailers around California and across the country are hoping to lure consumers out of the shopping doldrums and into stores this holiday season.
A year ago, retail industry experts were calling the 2001 holiday season the most promotional ever. But many now say this year could be even more intense as consumers remain reticent about spending, the prospect of war with Iraq looms and a calendar shift has trimmed almost a week from the number of shopping days between Thanksgiving and Christmas.
Predicting sales is tricky because consumers can react emotionally to economic news, good or bad, and to world events. After the terrorist attacks stunned the nation last year, analysts were downbeat about the holidays, but shoppers picked up the pace. November and December sales rose a combined 5.6% compared with sales in 2000.
This year, the National Retail Federation predicts that sales will rise 4% during the holiday shopping season, which officially launches Friday. That would be the smallest increase in five years.
Snagging consumers early has become increasingly important because people now shop in only half as many stores during the holiday season as they did five years ago. But once consumers visit a store, they usually return before Christmas, said Britt Beemer, a consumer behavior expert.
Scrambling to get ahead of the pack, retailers are trying a gamut of promotions to lure shoppers.
San Francisco-based Gap Inc., the nation’s largest specialty retailer, mailed out “mystery holiday cards” for the first time this year, promising discounts worth “up to $100,” while withholding the exact amount until the shopper gets in the store. The least valuable cards will take $5 off a purchase, Gap says.
Wet Seal Inc., an Orange County company that sells trendy clothes to girls and young women, is promising free two-way pagers to customers who spend at least $35 in its stores over the Thanksgiving weekend.
Pushing the envelope a little further will be Abercrombie & Fitch. The youth-apparel merchant is reportedly planning to trot out male models stripped down to their underwear to greet customers when they enter some A&F; stores.
Lingerie retailer Victoria’s Secret used the opposite sex to tempt buyers, with a prime-time display of scantily clad women during a televised fashion show last week. And Frederick’s of Hollywood has rolled out catalogs featuring Santa teddies and red velvet bras with jingle bells on the cups.
Meanwhile, Hayward, Calif.-based discount retailer Mervyn’s, a division of Target Corp., is hoping to plant itself in shoppers’ psyches with an ad campaign that begins today featuring photographer William Wegman’s Weimaraners -- the chocolate-colored, floppy-earned hounds -- dressed in Mervyn’s clothes.
“What we hope to do is cement in their minds that Mervyn’s is a fun place to shop,” said Steve Moylan, group manager of marketing, planning and operations.
In a tactic that seems to be working, Stein Mart Inc., a Florida-based gift chain that is beefing up its presence in Southern California, is selling diamond bracelets for $19.99. The diamonds are so tiny that the company has to call them “diamond accents,” said Gwen Manto, chief merchandising officer for the discount retailer. Stein Mart can’t make a profit, she noted, unless shoppers who buy the bracelets also buy something else.
“You hate to call it a loss leader, but we sell it below our typical profit margin,” Manto said. “If we can get them in our stores and we have the right things, then we’ll win.”
At the Stein Mart in Huntington Beach, customers snapped up the bracelets so quickly that manager Jacqui Spates-Teston had to hold back a handful -- and borrow 40 from another store -- so she’d have some left to sell on Friday.
“I was lucky to get what I could off the floor,” Spates-Teston said. “I’ve never seen such a hot item.”
Besides trinkets and other promotions, experts say, good prices also will be needed to attract shoppers.
“Retailers are going to find out this year, probably more than any other year, you’ve got to give the customer exceptional values,” said Beemer, chairman of market analysis firm America’s Research Group. “Consumers have not been in the spirit to want to spend a lot of money.”
Although discounts can hurt retailers’ profits -- and did in the third quarter -- the effect has been buffered somewhat because wholesale prices on many items have been declining, said Michael Niemira, a senior economist with Bank of Tokyo-Mitsubishi.
Apparel prices dropped 1% to 2% this year compared with last year, and prices on other items, such as radios and televisions, have declined much more, he pointed out.
Beemer suggested, however, that some retailers may delay too long before offering consumers the kinds of deals they’re hungry for. “I’m afraid they’re going to try to wait till the last weekend or two to give the customer real bargains,” he said, “and if they do, we’re going to have a disastrous Christmas.”
Almost 80% of consumers queried in a recent American Express survey said they would do some holiday shopping at mass merchandisers, such as Wal-Mart and Target, this year. And 86% said their shopping decisions would be driven by sales, spokeswoman Joanne Fisher said.
“Among those people surfing the Internet, there’s an even higher incidence of bargain hunting,” she said. Of the online shoppers questioned, 95% said they had been surfing for low prices. Further, 65% of those surveyed said they would set up a budget this year, up from 60% last year.
Warehouse stores, such as Costco Wholesale Corp. and Sam’s Club, also are increasingly attracting holiday shoppers.
Costco says it doesn’t advertise or slash prices during the holidays because the store’s prices already are low. But it has stocked up on its best sellers, including clothes, TV sets and barbecue grills.
“At any one time, we’ve probably got about 30% more apparel on the floor than we did last year,” said Bruce Greenwood, senior vice president of the Los Angeles region.
Explaining how abundance can serve as a sort of in-store promotion, Greenwood said one Costco recently heaped eight pallets with Levis and sold $27,000 worth of the jeans in a week.
“We think [shoppers] look at it and say, ‘If they have that much out, they must sell a lot and it must be a good deal and I’m buying a pair,’ ” Greenwood explained. “It makes it more impulsive.”
Greenwood expects that established Costco stores in this region will see an 8% sales increase in November and December compared with last year.
One product that Costco anticipates moving briskly in Southern California is Dom Perignon champagne, which it sells for $79 a bottle, about a third off the regular retail price. In fact, frills-free Costco sells more Dom Perignon than any other retailer, according to Greenwood, and the L.A. area accounts for 35% of its sales.
