Has the devaluation cycle begun?
And if you can buy goods for a few cents on the dollar, why won't your
boss expect the same deal when it comes to labor costs?
And will you see the degree of discounting in what you want to buy?
Finally...is this a sign of where housing and transportation are
headed..75% discounts and more?
TMT
After sales, will shoppers pay full price again?
By ANNE D'INNOCENZIO, AP Retail Writer Anne D'innocenzio, Ap Retail
Writer Wed Jan 7, 7:05 am ET
NEW YORK – Shoppers are getting used to those 75 percent off sale
signs, and that's bad news for merchants who worry they will also have
to quickly slash prices on spring goods to attract customers.
Anxieties about how rampant discounts have affected shoppers' psyches
and stores' profits are running high ahead of expected dismal December
sales figures on Thursday. The holiday season is anticipated to be the
worst in decades.
Already, retailers including Bebe Stores Inc. and J.Crew Group Inc.
are cutting prices on selected spring styles to lure sale-savvy
shoppers.
"It is a vicious cycle that no one wants to continue," said Gilbert
Harrison, chairman of Financo Inc., an investment banking firm
specializing in retailing. The discounts will be a key topic at
Financo's annual dinner on Monday for retail chief executives.
In addition, retailers expect competition from a rise in liquidation
sales — the fallout from the horrible holiday period.
Merchants struggling to clear out mounds of deeply discounted coats
and sweaters are wondering how they are going to get nervous shoppers
to splurge on new spring products.
The deep price cuts are making shoppers question the true value of
items. If they can get $200 jeans at 60 percent off, will they be
willing to pay the original price next fall?
"Our sense of what is fair and what is a good deal has changed," said
Michal Ann Strahilevitz, professor of marketing at the Golden Gate
University's Ageno School of Business. She said that a sale has to be
at least 70 percent off to be considered a bargain now.
Marcia Layton Turner, a mother of two from Rochester, N.Y., recently
walked away from an outfit that she spotted at a local Kohl's store
that was 50 percent off.
"Forty to 50 percent used to excite me," the 43-year-old writer said.
"Now, I want at least 70 percent." Turner says she has taken advantage
of 75 percent discounts on children's clothes in recent weeks and is
willing to wait to get the same type of deals in the coming months.
Consumers across the spectrum have been holding back.
Overall sales of apparel fell 17.3 percent from Nov. 30 through Jan.
3, while footwear sales dropped 12 percent compared to the same period
a year ago, according to figures released Wednesday by SpendingPulse,
a data service provided by MasterCard Advisors that estimates U.S.
retail sales across all payment forms including cash and checks.
Sales of electronics and appliances dropped 21.4 percent, while luxury
goods suffered a 27.6 percent drop. Online sales rose 4.6 percent.
Fourth-quarter profits are likely to decline more than 19 percent,
said Ken Perkins, president of research company RetailMetrics LLC.
Excluding Wal-Mart Stores Inc., one of the few bright spots, he said
the drop is expected to reach almost 28 percent.
Perkins predicts that profits will keep falling into the first
quarter, projecting an 11 percent drop; excluding Wal-Mart, that
figure is likely to fall more than 17 percent.
The financial meltdown in September that led to an abrupt halt in
spending came too late for merchants to dramatically adjust spring
inventories. Many stores order goods four to seven months in advance.
And while spring inventories are estimated to be down as much as 30
percent from year-ago levels, many analysts say that inventories
should be down even more. Barclays Capital analyst Jeff Black believes
it will take at least until the back-to-school season to get
inventories in line with consumer demand, and even then stores will
still face the challenge of weaning shoppers away from deals.
For those shoppers who could still load up on deeply discounted
merchandise, the last few weeks have been paradise. Even before the
Thanksgiving weekend, the traditional start of the holiday shopping
season, Saks Fifth Avenue marked down shoes by 70 percent.
But earlier deals look measly compared with some current offers as
merchants try to get rid of their holiday products by the end of the
month. The upscale DKNY store on New York's Madison Avenue is
plastered with a sign proclaiming "Up to 90 percent off."
As retailers work to clear out old merchandise, analysts say many are
trying to hold back on discounting new winter and spring items. Dan de
Grandpre, editor-in-chief of dealnews.com, said he is seeing more
bundling deals — a flat-panel TV that comes with a free Blu-ray
system, for example.
But many doubt that such strategies will work and predict early
discounts on spring goods. The signs are already there. Bebe has cut
certain spring sweaters by 25 percent, while J.Crew has marked some
spring items anywhere from 25 to 40 percent off, according to Amy
Wilcox Noblin, an analyst at PaliCapital Inc.
It will be years before shoppers are going to be enticed by discounts
of less than 50 percent, said C. Britt Beemer, chairman of America's
Research Group.
Traditional stores have also had to dump more excess goods at off-
price retailers like TJ Maxx, which reduce prices more, said Marshal
Cohen, chief industry analyst at market research firm NPD Group Inc.
But a bigger problem is liquidation sales at stores that are either
closing specific locations or shutting down the entire business.
Going-out-of-business sales at KB Toys and Linens 'N Things put
pressure on other retailers even before Christmas, and analysts expect
competition to get fiercer amid a likely spike in bankruptcy filings.
James Schaye, president and CEO of Hudson Capital Partners LLC., which
has overseen liquidations of Mervyns LLC, Tweeter Home Entertainment
Group Inc. and Steve & Barry's, estimated that his company liquidated
about $3 billion in merchandise in the October through December
period, compared with about $400 million a year ago.
On Wed, 07 Jan 2009 13:15:58 -0500, Ed Huntress wrote:
>>
>>> I wonder if it's possible to simultaneously suffer both deflation and
>>> inflation?
>>
>> Winston says Yes.
>
> Winston be wrong. You can have inflation and a contracting economy
> (stagflation), or deflation and a contracting economy (recession), but
> you can't have aggregate inflation and aggregate deflation at the same
> time.
Depends on your definition of "deflation."
"Inflation destroys real value in money. Deflation creates real value in
money. Alternatively, the term deflation was used by the classical
economists to refer to a decrease in the money supply and credit; some
economists, including many Austrian school economists, still use the word
in this sense. The two meanings are closely related, since a decrease in
the money supply is likely to cause a decrease in the price level."
http://en.wikipedia.org/wiki/Deflation
--
Regards, Curly
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13 Days More of George Walker Bush Plundering the Economy
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>
> And if you can buy goods for a few cents on the dollar, why won't your
> boss expect the same deal when it comes to labor costs?
>
> And will you see the degree of discounting in what you want to buy?
>
> Finally...is this a sign of where housing and transportation are
> headed..75% discounts and more?
>
> TMT