Retailers Suffer as Consumers Save on Some Good Bargains

Tough times for retailers are creating a bonanza for consumers, with the end of summer 2001 likely to go down as one of the best shopping opportunities in years.

End-of-summer sales are nothing new at American stores, with sellers marking down prices in hopes of clearing the way for new fall merchandise. But this season’s promotions, say financial analysts and observers, go far beyond the red-tag sales of years past.

“We haven’t seen this level of promotional activity since the last recession,” said Todd Slater, an analyst with Lazard Freres in New York. “Why? The consumer is in a funk. Even though American consumers love to spend . . . people are nervous about jobs, about salaries and about the overall health of the economy and for good reason.

“You probably could go further now on the same dollar than 10 years ago in most areas,” he said.

But what’s good for consumers can be catastrophic for sellers. While the sales may help clear out old merchandise, stores’ already-thin profits are being slashed. And even then, industry watchers say, whether the bargains bring in the buyers still remains to be seen.

At the Beverly Center, shoppers gloated over good buys but were quick to say they were nonetheless trying not to spend too much and were staying away from full-price items.

“I’m looking for the sales,” said Brandy Michelle Adams, a 23-year-old who lives in North Hollywood and works as a freelance makeup artist. “I’m doing everything with cash now, and I’m only setting aside so much.”

Adams, a self-proclaimed “shoe freak,” who tattooed a shoe on the inside of her right wrist to mark her devotion, said not even her occasional jobs in the mall, with all the screaming sale signs, are enough to shake her resolve to rein in her spending.

And that’s just what retailers are afraid of: Even their best offers will go wanting, and bad times now will turn into even worse times in the coming months.

The first indication that retailers were in for a rough ride was last year’s weak holiday selling season. But with many orders already placed for late winter and even spring and summer, it was too late for many sellers to react, resulting in excess product during a particularly sluggish market, Slater said.

In their bid to get people to shop, the retailers’ most obvious efforts are in marketing and advertising, which, depending on the store, is either more frequent, more aggressive or both.

Sears, Roebuck & Co. in mid-July departed from the usual heading on its advertising circular. The bolder insert’s new, to-the-point title--”Inventory reduction sale and clearance” on a red cover page--was a first, a spokeswoman said. At the same time, Best Buy Co. touted its offer of 10% off on all major appliances and Robinsons-May was charging customers $1 to upgrade their mattress purchases to the next larger size.

“It’s obvious that we have to price very sharply,” Sears spokeswoman Jan Drummond said. “The pressure is on even more because we’re looking at a very difficult second half of the year.”

Electronics chain Good Guys Inc. recently advertised an extension of the company’s storewide 29th anniversary sale, following a tough quarter in which sales and profit fell below last year’s level.

“Current economic conditions have allowed Good Guys and other retailers to be more promotional, which is always a benefit to customers,” said Cathy Stauffer, vice president of merchandising for Good Guys. “Do we want to stimulate people to come into our stores? Absolutely. Can they get a better deal than six months ago? I think in consumer electronics, that’s absolutely true.”

Some of the best deals, said market researcher Britt Beemer, are the ones brokered by savvy consumers who know that when sales are down, it doesn’t hurt to bargain.

“If someone is buying multiple items at a store, even a department store, I would at least ask the question of what kind of discount they might get,” said Beemer, chairman of America’s Research Group, a Charleston, S.C., market trend researching company. “They may not get a discount, but the store may end up waving the $50 delivery charge or give you something else.”

Furniture retailers have been especially hard hit.

West Los Angeles store Horizon recently featured a tent sale with as much as 80% off regular prices. Jennifer Convertibles promised a free set of three matching coffee and end tables with the purchase of certain two-piece living room packages.

“In the 15 years I’ve been doing research in this industry, there has never been a better time to buy furniture,” Beemer said. “That’s because furniture is always the first category to get postponed during a downturn and the last thing to go back up when the downturn is over. Furniture is easy to ignore--unless the spring is poking through the fabric and poking one’s derriere, there’s much less forcing one to buy furniture.”

Apparel sellers are offering other kinds of incentives, including deep discounts and store coupons. J. Crew promises customers a $10 gift card--and a $1 donation to charity--for every purchase of a pair of jeans or chinos. Gap Inc. says new members of its online mailing list will get 10% off the next purchase of $75 or more. Contempo Casuals offered buy-one-get-one-free on clearance merchandise.

And markdowns on markdowns are common, such as Ann Taylor’s recent pitch to take an additional 40% off all clearance merchandise.

Anna Lifbom, a 19-year-old au pair sauntering through the Beverly Center with a group of friends, proudly showed the group the black pants and tank top she scored for $27. Her friend Funda Acar, originally from Germany, was likewise thrilled with her stash of slacks, shirt and dress--all for $50.

“The sales here are great,” Acar said. “It’s not as expensive as we thought.”

It might have been very expensive for the retailers, however. The original prices on the items were as much as three times what the young women ended up paying. Buying only sale merchandise, Acar said, was easier than they expected.

Manufacturers, whose goods are likewise stuck in the pipeline, are stepping up their own incentives, offering rebates of as much as a few hundred dollars on everything from personal computers to washing machines.

And if the rebates aren’t enough, many retailers are offering generous financing packages with no deposit, payments or interest due for months or even a year or more.

Home Depot, for example, is offering a “home improvement loan account” that allows customers to buy items between $2,000 and $30,000 over a six-month period with no payment, no interest and no penalty for early payback.

It still may not be enough.

“The industry is hurting, and they are discounting more heavily to try to garner sales,” said Michael P. Niemira, an economist and retail analyst with Bank of Tokyo-Mitsubishi in New York. “The consumers are biting a little bit more over the past few weeks, but it’s not really a robust sales environment in spite of all the promotional activity.”

Adams, the makeup artist, agreed as she pointed to special offer signs around the cosmetics department of Bloomingdale’s, where she was freelancing for Too Faced Cosmetics.

“I went to a thrift store, and they’re even having sales,” Adams said. “I didn’t buy anything.”