How Low Can Prices Go?

NEW YORK — The spate of markdowns in the marketplace has retailers wondering how much more discounting can be done.

As Black Friday approaches, many retailers are prepping to cut prices even more to lure cash-strapped consumers into stores.

“People are still waiting to see what specials and promotions retailers will offer to determine whether they will shop Black Friday weekend,” said Ellen Davis, senior director of the National Retail Federation.

Already, the environment is more promotional than ever before. Last week, Saks Fifth Avenue and Bergdorf Goodman were offering 40 percent off some of their designer shoes, with free shipping for most online orders. Retailers, including Kohl’s and JCPenney have already promised new round of sales for Black Friday, and Target said it plans to get more aggressive as well.

“The consumer understands what’s going on right now,” said Tom Mendes of Plaza Too stores in New York and Connecticut. “Not just Saks, but even Bergdorf is doing things they’ve never done before.”

In a bid to compete, Mendes said, “we took a soft mark in early October on pre-fall items, and then toward the middle and end of the month we got more aggressive. We will do an additional 25 percent markdown from Wednesday through Sunday and we will also highlight key items that have been selling well for a holiday markdown.”

“We did start our sale a little bit earlier,” said Lori Andre of Lori’s Designer Shoes in Chicago. “We’ll continue to [discount] regular fall shoes, which we do normally, but we are not marking down any winter boots or Uggs.”

Andre said that consumer confidence and department store prices were taking a toll on her bottom line. “It’s almost like we’re in this deflationary period right now, which is really bad because the consumer won’t spend money unless it’s dirt cheap.”

The abundance of pre-Thanksgiving sales have left some independents with nowhere else to go. “We may pick some particular styles to promote more, but we don’t want to go deeper because we already brought a lot of our prices down,” said Shane Ward, co-founder of New York-based Detny Footwear.

And at least one retailer doesn’t plan to play on price at all. “Instead of discounting on Black Friday, we are releasing some new and exclusive product to excite our customers and bring them into the store,” said Tarek Hassan, co-owner of The Tannery in Boston and Cambridge, Mass.

Overall, Davis said that Black Friday could be a good day for many retailers. “From a consumer standpoint, there is more pent-up demand this year,” she said. “People have been pulling back on discretionary items for themselves all year and will use the holiday season to stock up on merchandise they haven’t been purchasing.”

But she warned that a strong day of sales would not necessarily translate into a robust holiday season. “In 2002, Black Friday sales were great, but we saw a 1.3 percent increase in overall holiday sales — the worst since we started tracking. So a great Black Friday can just be a sign of a bad economy.”

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s