Fallout: The Financial Crisis

Even with price cuts, retail is down

Marketplace Staff Oct 8, 2008
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Fallout: The Financial Crisis

Even with price cuts, retail is down

Marketplace Staff Oct 8, 2008
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Kai Ryssdal: With an economic slowdown comes a slowdown in consumer spending. Sometimes the spending slows first, actually. But whichever way the timing works out, retailers are often the first to really feel the pain.

September sales came in today, and some of the big chains got clobbered. Same-store sales were down virtually everywhere but Wal-Mart, and even there they weren’t up all that much. JC Penney was down 12 percent. Nordstrom was off 10 percent. And it wasn’t for lack of trying to make a sale. They’ve been marking down merchandise like there’s no tomorrow.

But as Jaime Bedrin reports, shoppers may finally have found some deals they can refuse.


Jaime Bedrin: Need boots. Buy a pair at Ann Taylor and get the second pair for half off. Skinny jeans? GAP is marking down its denim by as much as 40 percent. New living room lamps- They’re on sale too, at Restoration Hardware. And if you spend $400 in the store, you’ll get $100 dollars back.

With the economy on the rails, many retailers are cutting prices like it’s the day after Christmas. Jeff Trester is co-founder of PriceScan.com, which tracks consumer prices. He says stores are turning to extreme markdowns to reach consumers before things get worse.

Jeff Trester: They are already behind the eight ball. They are looking to get all the sales they can as economic conditions deteriorate. They know unemployment is rising and people are losing their jobs and I think, to some extent, they are trying to get ahead of the curve.

But it won’t be easy. Some stores are still trying to unload summer leftovers. Fall merchandise is barely moving. And holiday inventory is on the way. Trester says retailers are in a bind.

Trester: No one wants to sell at a loss. But given the choice between selling at a loss now or at a complete loss when items become obsolete and the holiday season ends and so forth, a lot of retailers will choose to blow out inventory.

Analysts say half the battle is just to get shoppers into stores. The number of customer visits to stores dropped more than 9 percent last month. That’s according to Shopper Track, which measures traffic at 50,000 retail outlets’s. Kimberley Greenberger follows retail stocks for Citigroup. She says the malls haven’t been this quiet since the days following 9-11.

Kimberley Greenberger: There were worries at the time that there could be bombs set off in shopping malls, and there was certainly a shock across the country in the aftermath of the World Trade Center bombings.

It is difficult to predict just what it will take to get customers to part with their money. Shoppers have become so accustomed to discounts that they’re almost immune to markdowns. But says, New York University marketing professor Russ Winer, there may be a tipping point.

Russ Winer: I haven’t seen any research that points to a magic number. But consumers are sensitive to numbers in the 30 to 40 percent range, for sure.

Treena Williams is a New York City postal worker. I caught up with her in Midtown Manhattan. She was indulging in a little retail therapy. She said she did get some deals, but not everything was the bargain it appeared to be.

Treena Williams: I was looking for a hoodie, and they had some 50 percent off. But it’s like overpriced anyway. So to take the 50 percent off is like that’s the price you should be paying from the beginning. So, it wasn’t really a sale.

Williams says that won’t stop her from hitting the stores again, and again, before the holidays. That could be good news for retailers and all those discounts could help shoppers through a tough time.

In New York, I’m Jaime Bedrin for Marketplatce.

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