Shoppers got obsessed with discounts during the recession. Stores are still paying the price
Shoppers who got addicted to buying merchandise at a discount during the last recession have more tools than ever to cross-check prices and find bargains, creating a race to the bottom — particularly on clothes.
Although retailers are trying to offer more exclusive products and improve the experience shoppers have in stores, online leader Amazon.com Inc. is expanding quickly into apparel, creating more discounting wars. Off-price stores and new discount chains keep the pressure on.
“There is not a lot that I would pay full price for,” said Sara Scoggins, a 30-year-old Los Angeles resident who uses apps like Hafta Have for scanning items and tracking deals and Honey for coupons and promo codes. “There is always a deal. You are a sucker not to get a deal.”
The bargain hunting started in earnest during the Great Recession, when consumer spending tanked and stores responded by plying shoppers with discounts upon discounts to rid themselves of mounds of merchandise. But even as the economy has perked up, Americans haven’t let go of the search for deals.
“We’ve conditioned consumers especially coming out of the recession for promotions and discounting,” said Jack Kleinhenz, chief economist at the National Retail Federation trade group.
Shoppers have time and technology on their side. An ever-growing number of apps, websites and browser extensions will search for shipping deals, sales and coupons. And for some shoppers, there’s a thrill in outwitting the stores.
Marc Phillips, 26, who works in digital strategies and lives in Manhattan, said he mostly buys clothes at the end of the season and shops at outlets such as Nordstrom Rack.
The cycle feeds itself. People grew used to getting great deals, retailers that tried to raise prices saw sales suffer, and shoppers got more bargains. Moreover, as shoppers gravitate toward services or experiences, demand for merchandise like clothing has waned — meaning stores have an even harder time raising prices.
Department store and mall-based clothing retailers have wrestled with the biggest challenges. Even luxury names like Michael Kors and Ralph Lauren have struggled to get shoppers to buy without discounts. And experts expect the discounting to increase as Amazon becomes more aggressive in clothing sales.
Amazon has made a big push to expand its offerings under private labels such as Lark & Ro, which are designed to be as stylish as recognizable national brands. So shoppers looking for a skirt or pants are automatically shown that brand compared with a well-known label.
Amazon is poised to surpass Macy’s Inc. this year as the largest U.S. clothing seller, according to Cowen & Co. analysts. They forecast that Amazon’s share of the U.S. clothing market will increase from 6.6% last year to 16.2% by 2021 as it gains more Prime members and expands its clothing selection.
In the meantime, U.S. retailers are facing new competition from low-price international rivals, including the Primark chain that has started opening stores in the Eastern U.S. It offers jeans as low as $7 and tops for $4.
This all means retailers actually have less ability to raise prices now than during the recession, said Michael P. Niemira, chief economist at the Retail Economist, based on an analysis of government data.
Lyst, an online fashion platform, said that 30% of orders on the site last year included a discount, up from 23% in 2014.
First Insight, which helps retailers price new items, said its tests have found that about 8% of products over the past three quarters could sell for full price or higher. That’s down from the 11% average over the last several years.
So, is there anything stores can do to convince people that their items are worth full price?
Kleinhenz said stores need to differentiate their products to give people more incentive to buy without sales. J.C. Penney Co., which has called its previous level of discounts “unhealthy,” plans to use a more data-driven approach to pricing to better manage discounting. Historically, Penney’s decisions on pricing and promotions were made more instinctively and with few analytics.
Ai, meanwhile, thinks retailers like Macy’s need to test a lower range of prices online with its store-label products, which could drive more shoppers to their sites.
In the end, it’s a shopper’s choice whether to buy as soon as they find a product they want or to wait and see if the price comes down.
Leor Reef, 24, who works in public relations and is based in Chicago, said he learned about frugality from his parents, who always sought good deals. He says he shops mostly online, uses price-tracker browser extensions like camelcamelcamel, and tends to buy only when he sees a good deal.
“It does put me in more in control as a consumer,” he said. “As long as I am not in a rush, I can hunt around and use my tools to find the best price.”
The downside: Reef wanted the popular Wilson Evolution basketball and waited a month for the price to go down 15%, but then it was sold out — and he was left empty-handed.
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