Consumers expect to buy low
The 2008 holiday shopping season was one of the worst ever. Retailers offered a lot of sales, but it didn't get people to hit up the stores. As Stacey Vanek-Smith reports, all those markdowns have created an expectation from consumers and put retailers in a bad spot.
A shopper carries a bag advertising a sale. (Justin Sullivan/Getty Images)
TEXT OF STORY
Kai Ryssdal: We've all kind of known for weeks, but today we got the numbers to back it up. This was officially one of the worst holiday shopping seasons on record -- for everybody too. Barnes and Noble, Target, even Wal-Mart was off expectations. Macy's said it's going to close nearly a dozen stores, and the high end didn't do any better. Sales were off 28 percent at Neiman Marcus. Even triple markdowns and 75-percent-off sales couldn't get consumers off the couch. And Stacey Vanek-Smith reports that leaves retailers playing a game of expectations.
Stacey Vanek-Smith: If one of your resolutions was to only buy things on sale, no problem. All of those year-end discounts have given way to New Year's discounts.
Britt Beemer: Right now, no consumers are thinking about buying anything at regular price.
Britt Beemer is the author of "The Customer Rules." He says we've become a nation of sale-aholics, and anything less than half off just doesn't do it anymore.
Beemer: Consumers are saying, OK, that's now the new threshold. 50 percent off is a good sale, 70 percent off is a great sale.
Beemer says that sale-junkie mindset has hit retailers hard. Stores are practically giving away what's left over from winter, and some have already started cutting prices on new Spring merchandise. Marian Friestad studies consumer behavior at the University of Oregon. She says even consumers who have money are holding back.
Marian Friestad: The media coverage of this, let's be honest, tells people that there may be deeper discounts coming. So consumers are smart; they're willing to wait for that.
That waiting has retailers in a serious bind says Conference Board economist Ken Goldstein. They can sell merchandise or they can make money.
Ken Goldstein: The question is how can they do both at the same time and right now, for a lot of firms, there is no way.
Goldstein points out that dozens of major retailers like Mervyn's and Linens N' Things went bust in 2008, and high-end chains like Saks and Neiman Marcus are on the ropes.
Goldstein: We've already seen a number of fairly big firms and chains go out of business. There's going to be more before this is over.
Goldstein says many retailers are still struggling with too much inventory. That could mean many more months of mark-downs and razor-thin profits. And another good year for sale-aholics.
I'm Stacey Vanek-Smith for Marketplace.
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From OH, 01/09/2009
Hi, very interesting little vignette here. You can tell the retailers here is what I think: Since those nice shirts and slacks are costing about $1-2 each to make in Guatemala and Honduras and they have been selling them to us for years at $35 to $75 or more, I am willing to pay maybe $8-&10 max for them. Things are tough all over and so are those obscene profit margins. I have no sympathy for those whiners from the business world. Also, that fully loaded Lexus that was overpriced at $35K, I might be willing to pay $14K for it..."maybe", make it worth my while, or, sorry, I won't part with those hard earned dollars that you are thirsting for. And that super-revved up computer?...maybe I'll give you $250 bucks, NOT the $2,300 you were gouging me for and then made obsolete in 2 years...Oh yeah, throw in that color lazer printer as a bonus too. Can you see where this is leading, the tables have turned and you BETTER make it worth my while, ie, 80% discount after markdowns, or that spot is my mattress is gonna grow a lot fatter.....signed Joe Consumer.
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