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Blog: As Time Goes By

It’s not the same old story for retailers

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There’s something wrong with this picture: stores jammed, shoppers battling for merchandise, shelves emptying – and red ink dominating the balance sheet.

As reports began trickling in, in the first week of January, the mixed results took on a decidedly grim cast: Yes, sales were up, even above expectations. But those expectations were based on the retail premise – perhaps first established in the sixth century B.C. by Mede farmers trying to sell their persimmons at Persian bazaars on a Sunday afternoon – that when you sell something, you sell it for more than it cost you.

Twenty-six centuries later, retailers are struggling to maintain that basic tenet. Thomson Reuters reported that major retailers’ same-store Christmas sales rose 3.4 percent, not bad and even slightly ahead of analysts’ expectations.

But those sales were largely gained by big markdowns. So last week, some major retail chains – Target, Kohl’s and Penney’s, among them – were already announcing lowered fourth-quarter profit expectations.

“Retailers hoped that as they planned some promotions on key items, that would entice the consumer to spend money,” consultant David Bassuk, managing director at AlixPartners, told The New York Times. “That didn’t happen.”

What did happen was that all those planned promotions were not as exciting as the consumer was expecting, or at least that it didn’t excite them enough to venture off the sales racks. So retailers had to turn to unplanned promotions – deeper discounts, like “50 percent off our entire store.” “That’s when you can see that times are still tough,” Bassuk said.

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When I was a kid, retailers’ way of taking advantage of the gift-giving season was by charging full price throughout December and warning holiday shoppers to buy early while merchandise was still available. You’d have what you needed for under the tree and in the stockings.

Not until after New Year came the discounts, sales and specials. In the first half of January, after the orgy of shopping for presents was over, retailers would lower prices and savvy, penny-wise shoppers (like my mother) would then descend on the stores to take advantage of whatever goods were left.

Shelves would clear and stores would make way for spring merchandise. It was a simple formula, and it worked.

But that’s when I was a kid. And Ike was president.

We’re in tough times, now, and many of the usual rules no longer apply. And I know the pressure on retailers to take advantage of the country’s biggest buying period is irresistible. But at this rate, their path to success will lead them to the bankruptcy line.

Or, as Dooley Wilson crooned in “Casablanca,” “it’s a case of do or die.”
 

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