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Retailers racing to the bottom with discount prices …

Excerpted from Reuters, “”Full price” to take on new meaning in 2009″, by Martinne Geller, January 16, 2009

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Department stores and apparel retailers may have bid farewell to the idea of selling merchandise at full price after taking brutal markdowns during the U.S. 2008 holiday season.

In November and December, consumers were treated to unprecedented discounts on even the most prestigious brands to spur purchases in the recession.

Retail executives now fear they have trained consumers to shop only when there are discounts, prolonging the squeeze on their profit margins. With no major buying holidays between now and the back-to-school season, analysts say consumers could even put off shopping for six months or more.

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A likely strategy is for retailers to lower initial prices to lure shoppers. That could decrease the need to later mark down unsold goods dramatically, analysts said.

Industry analysts expect clothes will come on the market in 2009 about 20 percent lower in price than they did last year, and in some cases, as much as 40 to 50 percent lower.

A smart pricing strategy is key to preserving brand cachet this year.  “I don’t think retailers can survive with a 50-percent-off sign,” he said.

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Retailers are engaging in a “race to the bottom” in terms of pricing, and the economic downturn pits high-end store chains against a growing cadre of lower-cost rivals.  Though higher-end chain J Crew, for example, is striving to sell its clothes at full price, they are “adjusting prices right now” in certain lines, admitting that opening prices were “too high.”

Edit by DAF

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Full Article:
http://www.guardian.co.uk/business/feedarticle/8271675

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This entry was posted on February 24, 2009 at 7:00 am and is filed under Mktg - Pricing, Retailing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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