Retailers try more subtle sales this year

The Wall Street Journal

With the holiday shopping season already under way, many of the nation's leading retailers say they plan to avoid the kind of deep, across-the-board discounts that gave last year's season an air of desperation -- and crimped profits.

Instead, many are using more subtle, under-the-radar promotions to lure shoppers this year.

Several big chains, including Federated Department Stores Inc. and Limited Brands Inc.'s Express division, are cutting back on the number of blockbuster discount events that they've relied on in past years to pack their stores.

Even Foot Locker Inc., whose buy-one-get-one-free deal helped spark a frenzy of similar activity among rivals last year, insists it's changing course.

"We think that particular promotion for our store has gotten a bit stale," said Peter Brown, a spokesman for the New York-based chain.

Wall Street likes the new discipline.

"The trend has been to rein in harmful promotions," said Todd Slater, an analyst with Lazard in New York. This year, he said, "retailers may be prepared to leave some pockets of business on the table, which is healthy."

Better outlook

Retailers can't afford to reprise last year's disappointing holiday season, when sales of apparel, toys, electronics and other gifts rose by a modest 2.2 percent, according to the National Retail Federation in Washington. Early warning signals abounded last year: Sales actually slowed heading into the holiday season, prompting many merchants to rev up the promotional machine in earnest.

John Morris, an analyst at Harris Nesbitt Gerard who has been tallying holiday discounts for several years, said the number and severity of markdowns increased 10 percent in 2002, on top of a 15 percent rise in 2001.

This year, thanks in part to a healthier economy, retail sales are accelerating as the holidays near. And despite the better outlook, stores generally have refused to stock up on extra inventory, which means they have the luxury of being more measured in their discounting strategies.

"It is going to be a less-promotional holiday selling season," Morris said.

Still, even while they are avoiding undignified 50 percent-off signs, some retailers are encouraging their best customers to come in early with special, targeted discounts.

"I think people are tired of the all-day sale," said JoAnn Brosi, general manager for the Glendale Galleria, a mall in California. "When they're on a mailing list and they're asked to be part of a small promotion, it makes them feel special."

Invitation-only sales

Sharon Chortek, a Dallas-based TV producer, has a stack of special pre-holiday promotions she's received in the mail over the past three weeks. Each come-on has a little different twist.

One, from The Galleria -- a top-tier Texas mall anchored by Saks Fifth Avenue, Nordstrom and Macy's -- offers a $25 to $50 gift check to any number of Galleria specialty stores, including Williams-Sonoma, Coach and Cartier.

To qualify, shoppers need to spend $200 at the mall. The promotion, which began Nov. 7, runs until supplies last -- a "big incentive to get there early," Chortek said.

Last week, Chortek was invited to the special three-hour sale at Neiman Marcus called Private Night, offering 25 percent to 40 percent off on such merchandise and products as Burberry, which rarely go on sale.

"It was a frenzy," she said, adding she felt special to be invited until she saw the packed parking lot. "Then I didn't feel quite as special."

'Friends and family' coupons

Two Federated chains, Macy's and Bloomingdale's, are giving out a limited number of "friends and family" discount coupons that once were reserved for those with ties to store employees. At Macy's, customers can set aside items and get a 20 percent discount when they return within a few days.

"I'd do this, especially if there's no restrictions," said 21-year old Jennifer Cheng, who was shopping with her mother at the Macy's in the Beverly Center, in Beverly Hills, Calif. "Usually, I just shop on impulse, but with a special set-aside, you can shop and then come back later and get the discount too."

At the mall's Bloomingdale's store, customers who requested a friends and family" coupon were given one entitling them to a 20 percent discount on most merchandise last week.

At Gap Inc.'s Old Navy division, employees will be handing out scratch-off sweepstakes cards, as they did last year. But the discount chain's second holiday promotion, new this year and running next month, requires customers to buy a gift card to have a chance to win.

Old Navy will randomly "Gigant-o-size" 1,000 gift cards when they are redeemed, making them worth 10 times their purchase value, up to $1,000 each. The promotion still is a form of discounting, company officials acknowledged, but it doesn't cost as much in lost profits as widespread price-cutting.

Grabbing shoppers early

Shopping at the Newport Centre mall in Jersey City, N.J., on Satuday, Ryan Stankus noticed how retailers were trying to create business.

"I guess they want people to buy now to generate sales early," the 29-year-old computer programmer said as he stepped out of the Gap.

Stankus had purchased slacks, gloves and a hat for about $127 and, in return, received a Gap "holiday season pass" that allows diminishing discounts as the season progresses: 20 percent off purchases made now, then 15 percent on those made in early December and 10 percent on those made in late December.

Only those who did some shopping on or before Nov. 18 were eligible for the discount card, a perk that Mr. Stankus said would definitely drive him back to Gap later.

Teen retailer American Eagle Outfitters Inc. is offered a coupon, good only through last Saturday, that urged shoppers to buy one of 16 "ultimate gifts."

The coupon gave a 10 percent-to-20 percent discount, depending on the number of items purchased.

It's a reflection of how accustomed shoppers are to the near begging that characterized some holiday promotions over the past couple of years.

"I'll definitely check it out," said 29-year-old Madeleine Corzo. However, she added that Macy's promotion seemed like the better deal, since invitees could get discounts on nearly everything in the store.

Shelly Branch, Stephanie Kang and Amy Merrick of The Wall Street Journal contributed to this report.

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