Dis­counts down 5% so far this sea­son


Austin American-Statesman - - BUSINESS - Con­tin­ued from B

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.

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