Big Apple Diary

As U.S. Department and Specialty stores continue to report October sales results it is apparent that the holiday shopping season continues to look increasingly dismal. Overall retail sales fell by 2.2% …a record decline.  To break this down more specifically, sales at general merchandise stores which is the category that includes big chains such as Wal-Mart and department stores, fell by 0.4% while sales at specialty clothing stores were down more at minus 1.4%

And hence the "panic factor" on the part of the retailer to minimize losses & reduce inventories begins as they face the most challenging holiday season in years. But there is a bright side for the consumer as Traditional "brick & mortar" stores, Outlet stores, and Websites desperately seek shoppers. The special deals have already begun!!! This is a full 2 weeks earlier than the traditional kick off date of the US holiday shopping season, the Friday after Thanksgiving, this year November 28th. 

No customer is excluded in this tough retail climate as every tier of retailer, catalog or website attempts to creatively reach out and entice the shopper to spend $$$$$$$$'s

• The race to reduce prices is already in high gear. Consumers are reaping the benefits of markdown mania with lowest reductions in apparel and accessories at 30% off to an unheard high of 70% off !  Neiman Marcus, Nordstrom, Saks, Bloomingdales, J Crew, Macys, Kohl's, JC Penney; from luxury to midtier to mass merchants all have begun aggressive promotions. Luxury stores in particular have stepped up the timing and taken deeper markdowns in couture, designer and contemporary apparel.

• Wal-Mart stores underwent an image "facelift", embraced a new advertising campaign: "Save money. Live better." and dramatically cut prices on over 15,000 items inclusive of toys and electronics by an unprecedented 20% to lure holiday shoppers. This tactic has rocked the industry and resonated with the America consumer. In fact they have managed to attract a new customer base, the "aspirational consumer" who has traded down from luxury stores like Nordstrom.  Wal-Mart's strategy has already paid off as the retailer posted a 10% increase in 3^rd quarter profits and continues with an upbeat momentum for the holiday season.

• "Friends &Family" events have been run much earlier than usual this season. Best customers are offered special discounts up to 30%on regular & promotionally priced merchandise. Typically there are a list of product & brand exceptions but have noticed there are far less exclusions this time around. Normally this is an event that is restricted to 2 times per year (1 X per season) but many stores who ran this event in October will repeat the promo again in December.

• Free shipping is usually a very restricted offer but already many websites and catalogs are in full swing or have already offered multiple times. Target, Lands' End, Talbots just to name a few are using this service to attract customers.

• In mid October, Kmart launched layaway service positioning themselves as the only mass merchant to offer this service. For years, Wal-Mart their rival in the mass merchant arena offered this service to customers but phased it out in '06. Now Kmart is hopeful that their current customer as well as new prospective customer base sees this as a value concept and gives them a reason to spend. The campaign was targeted to household incomes starting at $50,000 annual.  Needless to say there is a massive air & print media support loudly announcing this initiative.

• So what's the answer for luxury tier stores where even the whispering of the word layaway is sacrilegious??? This past weekend Saks 5^th Ave might have come up with the high end equivalent when they broke their campaign "The Gift of Time"  as a full page ad in the Sunday, Nov 16th  NY Times. They dangled the carrot of "no interest and no payments for 12 months when their customer spends $2000 or more all on one receipt." This is a limited offer through Dec 11^th but willing to hedge my bet on if this meets with success the expiration date will be extended.

• Even the beloved Outlet Centers are looking for a creative handle to attract customers this holiday. Once a phenomenon offering day in day out promotional value at 20% – 30% off regular store prices they find themselves fighting to compete with "brick & mortar" department stores. Now every retailer is their competition so they turned to a constant stream of coupons, mailers and email blasts announcing sale events at 30-50% off. Tangiers Premium Outlet centers located throughout the U.S. are promoting a "Midnight Madness "event and have invited customers to "join us after your Thanksgiving dinner" with stores in the center opening at midnight. This concept was tested last Thanksgiving and met with overwhelming public response. So now it has become "the happening" to attend after your Thanksgiving dinner. Certainly in a depressed economy, the consumer is looking for a way to have some fun and forget their economic problems if just for a few hours!

As Thanksgiving approaches and Black Friday looms for all U.S. retailers, there is a limited window of opportunity for merchants to be creative in their effort to lure the customer. Although people are definitely cutting back on spending, one thing they can count on is that people are still going to spend money, it is just a matter of where???

To be continued………

By Cheryl Nowak