Consumers Get an Early Christmas Present

‘Tis the season for price slashing.

With no must-have toys or standout apparel being pushed this holiday season, retailers instead are using discounts of up to 50% off as the best motivators for getting customers into stores, industry analysts say.

Now, as the shopping season enters its final hours, the question is: How low can they go?

Apparently, as low as they have to.

“Retailers will do whatever it takes” to make last year’s revenue numbers, said Marshal Cohen, co-president of market research group NPD FashionWorld. “And this year they are promoting their way into achieving that.”

Richard Giss, a retail analyst with Deloitte & Touche in Los Angeles, agreed that stores would continue to reduce prices through Christmas, if that’s the only way they think they can generate enough business. “The gloves are off,” he said “There’s a lot of panic.”

Over the weekend, many of the stores inside the Glendale Galleria -- one of the largest malls in Southern California -- were touting sales of 50% to 70% off. Even on tony Rodeo Drive in Beverly Hills “sale” signs abounded: Shoe designer Charles Jourdan marked down all merchandise 70%, and the Emporio Armani boutique slashed apparel prices 40%.

At the Macy’s department store at the Brea mall, some men’s sweaters were going for half price, and then an additional 40% was being taken off the ticket on top of that.

Similarly, at an Express outlet in Pasadena, nearly all sweaters, jackets, jeans and T-shirts were discounted up to 50%. But the store didn’t stop there: Shoppers were given another 20% off everything once they got to the checkout counter, where they also were handed a $25 store voucher for use after Jan. 3.

Shoppers “are looking at the price and unless it’s 50% off they dismiss it,” national retail analyst Kurt Barnard said Sunday. “Even at 50% off, they can’t make up their minds to buy it. The battalion of bargain hunters is out in full force.”

Low prices got 37-year-old Dionne Colvin in a shopping mood early this year, but the deals were so good that the San Pedro resident put her gift buying on hold and began snapping up clothes and shoes for herself. By Saturday, Colvin, a department manager for a car manufacturer, was at South Coast Plaza in Costa Mesa buying for others.

“Now I’m trying to catch up and do my Christmas shopping,” she said.

Ivan Torres, 25, was happy with what he found at the Target store in Eagle Rock on Friday.

“I got my mom’s sweater for 6 bucks,” said Torres, a medical assistant at Kaiser Permanente in Los Angeles. “Hopefully it fits her and she doesn’t want to return it because she’ll find out how much it cost.”

Some retail experts had expected that the lean inventory in stores this year would heighten demand and, at some point, give retailers an edge. That didn’t happen.

Instead, many retailers discovered that they had to cut prices early and deeply or lose customers to competitors that were doing whatever it took to win sales. Unloading store shelves quickly this time of year is important in part because retailers must make way for spring merchandise.

“If you’ve got something that just isn’t selling, you can take it down to 30 cents on the retail dollar and get as much money as you’d have gotten if you sold it to a close-out company,” said Giss, the Deloitte & Touche analyst. If the store has been forced to take a loss, it at least has gained -- or kept -- a customer.

Despite the steep markdowns, consumers have remained cautious for a variety of reasons this year, experts say. Among them: uncertainty about the economy and the possibility of war with Iraq.

“For shoppers, it’s a paradise,” Barnard said. “Unfortunately, many consumers are not in a position to take advantage of it. We are dealing with a very jittery consumer.”

Still, because the period between Thanksgiving and Christmas was six days shorter than usual this year, some industry observers thought shoppers would feel the pressure and buy more consistently this season. Instead, sales were strong over the Thanksgiving weekend, dipped, and then improved somewhat.

Although sales numbers for the last week aren’t yet available, anecdotal evidence indicates that Saturday was, as usual, the busiest shopping day of the year, according to Scott Krugman, spokesman for the National Retail Federation.

“It seems the last-minute shopping is going to make or break holiday sales,” he said.

Yet retailers have gotten some breaks this year, including lower wholesale prices. And, unlike 2001, when the terrorist attacks upended business, retailers were prepared for sluggish sales this year. So they bought conservatively to minimize the effect on profits.

“Retailers knew well in advance there were going to be markdowns,” said Krugman, whose group has predicted the lowest sales increase in five years for 2002.

And although markdowns erode margins, Krugman said the effect probably won’t be as bad this year as it was in 2001, partly because of the shriveled expectations.

Cohen agreed. Having “bought smart” this year, he said, some retailers managed to pay, say, $10 for a shirt that they could price at $40. In such cases, they could take 25% off the price, and cut an additional 40% off that, and still beat what they paid to the wholesaler.

Desperate to get customers into stores, retailers often toss out a “loss leader,” a low-priced item that they don’t expect to make a profit on, but which is expected to draw customers who will then buy something else. The technique works particularly well for mass- merchandise stores, such as Target and Kmart, which have a wide range of products.

“While you’re in the store sticking a Chicken Dance Elmo in your cart, you’ll pick up a pair of khakis, a golf shirt, a sweater for Uncle George and groceries,” Cohen said.

Stores this year also have increasingly used “door busters” -- special sales for early shoppers -- to lure customers inside. The tactic worked, Barnard said, but only to a point.

“When the promotion ended, the shoppers disappeared like snow in the palm of your hand,” he said. Consumer electronics stores were an exception to the rule, he noted, having had more success at sustaining interest from shoppers.

Shortly after the launch of this year’s shopping season, analysts and retail experts said that a game of “retail chicken” was getting underway between stores and customers. The question then was: Who would become more desperate as the weeks wore on?

Now that Christmas is almost here, the victor is obvious, Giss said. “The consumer won this one. The retailers have blinked.”

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Times staff writer Hilda Munoz contributed to this report.