Stores betting on 1-cent sales

Jones writes for the Chicago Tribune.

Dump out the coffee cans, car ashtrays and the bottom of your purse. The lowly penny, which almost was taken out of circulation three years ago, is making a comeback as the recession puts a crimp in back-to-school sales.

Spiral notebooks, batteries, markers, crayons, pencils and even some clothing are just a few of the items going for 1 cent these days. The gimmick, which seems as old as the penny, is gaining traction as merchants try to attract penny-pinching consumers with deals.

"You're playing into the consumer psyche, which is already delicate as it is," said Marshal Cohen, chief industry analyst at NPD Group, a market research firm. "Buy one, get one free has been around so long it doesn't even make a noise. Buy one, get one for a penny feels like a deal."

The penny bargains come amid expectations for a grim back-to-school selling season. Citigroup Global Markets Inc. predicts that this will be the first year that back-to-school sales will decline since at least 1995.

Back-to-school shopping typically runs from July to early September. It ranks as the retail industry's biggest revenue period after the holiday season. And many analysts consider it a harbinger of holiday sales.

With back-to-school shopping budgets shrinking and families putting off all but the most essential purchases until after school begins, the race to grab shoppers' attention is intense.

Staples Inc. and OfficeMax Inc. have led the charge with penny promotions that change weekly. OfficeMax has sold highlighters, crayons, sharpeners, paper folders and spiral notebooks for 1 cent, while Staples has offered pencils, printer paper, lined filler paper and spiral notebooks.

The office-supply chain stores, which count back-to-school time as their biggest selling season, have latched on to penny promotions as drugstores and dollar stores expand onto their turf.

CVS Caremark Corp. stores, for example, have giant cardboard cutouts of scissors and staplers and thumbtacks hanging above the school supplies aisle touting "back-to-school savings." Yellow cardboard bins are stuffed with an array of quirky and useful items for $1 each, including paper clips shaped like cows and packages of miniature highlighters.

And Wal-Mart Stores Inc. is running full-page newspaper ads promising "50% lower prices than national office-supply superstores" on commonly purchased back-to-school supplies.

"Retailers are trying to stimulate demand," said Paula Rosenblum, managing partner at Retail Systems Research, a Miami retail consulting firm. "This is about getting people into the store. If you also end up buying ink refill for your printer, the retailer has made back the money." The problem for retailers is that shoppers have become so savvy about prices that taking a loss on one item to make it back on others is getting to be a risky strategy, Rosenblum said.

Shopper Kyriaki Dominguez said penny deals get her in the door, but she won't spend on other items if she knows she can get them cheaper elsewhere.

While school shopping with her son at a Target in Chicago last week, Dominguez refused to buy the pencil refills on her son's school supply list because the price was $4.72. She remembered seeing two packs of pencil refills for $6 at Staples. And while at Walgreens earlier this month, she discovered dry-erase markers on sale, so she stocked up, knowing her son would need them.

"For school shopping, I go from Staples to OfficeMax to Target to see who has the best deals," said Dominguez, a Chicago mother of three school-age children. "You have to bounce around and grab what's on sale."

Staples was one of the first retailers to resurrect the penny for back-to-school shopping in 2006 after finding that selling supplies for a dime or a quarter for a limited time sparked sales the year before. The promotion gained steam when the recession set in and is now a hallmark of the retailer's crucial July and August selling period.

"Unfortunately, there are a lot of other people out there fighting for back-to-school business. Drugstores. Discount stores," said Don LeBlanc, senior vice president of retail marketing for Framingham, Mass.-based Staples. "We needed a way to get the word out and break through the clutter. It doesn't matter what the item is. One penny is a great deal."

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