Discounts down 5% so far this season
The Associated Press by ShopperTrak, a Chicagobased firm that tracks spending at 40,000 stores across the country. That’s slightly below the 2.7 percent increase over the Thanksgiving weekend when shoppers spent $22 billion.
The modest increase means sales for rest of the season will be crucial for stores, which get as much as 40 percent of their annual sales in November and December. With only about a week and a half left until Christmas, stores have a ways to go in order to reach ShopperTrak’s forecast of a 3.3 percent rise in sales during the two-month stretch compared with the same period last year.
It’s like the ghost of Christmas past has returned for stores. In order to salvage the season, they may be forced to offer the kind of heavy discounts that helped boost sales last year, but that also ate away at their profits. That’s something stores have tried to resist all season: Promotions are down 5 percent so far this season compared with last year, according to BMO Capital, which tracks promotions at about twothirds of mall stores.
To be sure, there still are plenty of 30, 40 and 50 percent off sale signs in store windows. But stores also have been doing more creative things with pricing to get shoppers to think they’re getting a better deal than they really are. Think: Offering jeans for $9 instead of $9.99, hoping round numbers will appeal more to shoppers, or selling two shirts for $20 instead of giving shoppers 20 percent off.
“The retailing nation is trying to get off the discounting habit,” said Paco Underhill, founder of Envirosell, which studies consumer behavior. “It’s just like heroin — the more you do it the more you need to do it.”
The fact that stores are struggling to find the right balance between pricing and profits during the holiday season is no surprise. They’ve been doing that since the dawn of department stores in the 1800s. Perhaps the biggest change occurred in 1975, when the Consumer Goods Pricing Act repealed state fair trade laws, allowing stores to sell items at whatever price they want instead of what manufacturers dictate.
Prices like “$19.99” instead of “$20” sprang up because as Baba Shiv, a marketing professor at Stanford University who focuses on neuroeconomics, puts it: “When you see something for $9.99, the brain categorizes that as being $9 rather than $10,” he said. “Those things are still effective.”
But at a time when shoppers are more price sensitive, some stores have gotten rid of the ubiquitous “99 cents” in prices in favor of flat prices.