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Nov 12, 2010
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Retailers chose many paths to holiday sales

By
Reuters
Published
Nov 12, 2010


(Reuters) - Clothing retailer Gap Inc (GPS.N) is counting on shoppers to buy themselves a holiday present now, leaving purchases for friends and family until later.

Wal-Mart Stores Inc (WMT.N) may have pulled back from price "rollbacks" in its day-to-day business, but for the holidays, the pace of those high-profile price cuts is up sharply from this time last year.

Toys R Us Inc TOY.UL has opened hundreds of temporary stores for the holidays. Target Corp (TGT.N) and others plan campaigns on Facebook and Twitter and with smartphone applications that will help consumers find bargains.

Retailers are choosing many different ways to break customers of their habit of waiting for last-minute discounts, hoping the 2010 holiday season will show signs that the economic recovery can hold even as unemployment remain stubbornly high.

"The consumer this year is going to be given the opportunity to buy earlier," said Marshal Cohen, chief industry analyst at NPD Group. "They're also going to be given more information about what's going to be coming down the road."

The hope is to continue momentum from the back-to-school season, which has boosted retail shares. At Thursday's close, the Standard & Poor's Retail index .RLX was up 22 percent from the end of August, compared with a 15.6 percent increase for the S&P 500 .SPX.

EARLY PUSH

Many retailers have tried to whip up holiday excitement well before the traditional start, on the Friday after U.S. Thanksgiving Day at the end of November.

Sears Holding Corp's (SHLD.O) namesake department stores kicked off the holidays with "Black Friday" sales that began last week.

Best Buy Co Inc (BBY.N) got things started even earlier, with "Free Phone Fridays." Since October 1, the consumer electronics chain has been offering a different smartphone for free each week when a customer pays for a two-year calling plan.

But the push to shop early runs contrary to recent consumer behavior.

Retailers had solid back-to-school sales in September and October, but shoppers waited until the last minute to spend. That last-minute mentality was already in place before the recession, but accelerated in 2008 as consumers saw retailers slash prices to move holiday inventory.

"We do think the trend of consumers delaying their purchases will continue to be pronounced," said Morningstar analyst Zoe Tan.

One of the ways retailers are looking to break the trend is by getting shoppers to splurge on themselves first.

Gap, for example, plans to start the season by putting out clothes people will buy for themselves, such as tailored black pants.

But the push to shop early runs contrary to recent consumer behavior.

Retailers had solid back-to-school sales in September and October, but shoppers waited until the last minute to spend. That last-minute mentality was already in place before the recession but accelerated in 2008 as consumers saw retailers slash prices to move holiday inventory.

"We do think the trend of consumers delaying their purchases will continue to be pronounced," said Morningstar analyst Zoe Tan.

One of the ways retailers are looking to break the trend is by getting shoppers to splurge on themselves first.

Gap, for example, plans to start the season by putting out clothes people will buy for themselves, such as tailored black pants.

"Our campaign for holiday is centered around holiday wants," Chief Executive Glenn Murphy said on a recent conference call. "We'll lead with our most wanted product of the season -- that's that 'buy for me' part -- and then follow up with the most wanted gifts."

Offering more discounts sooner is another strategy. Even as it has shifted back to "everyday low pricing" for the rest of the year, Wal-Mart has accelerated its holiday "rollbacks" -- or short-term deals. The company has already cut prices on 2,000 toys this fall, up from 1,400 at this point last year.

"During the holiday season, we know how aggressively customers are comparison shopping (at) multiple retailers," Wal-Mart spokesman Ravi Jariwala said.

On the pricier end of the economic spectrum, retailers keep trying to move consumers away from deep discounts.

"We've actually been trying to reduce the amount of promotions at the high end, managed our inventories carefully and weaned ourselves off promotions," Saks Inc (SKS.N) CEO Steve Sadove said.

At least in some cases, such strategies have worked.

"If it is a unique item or ... color, people are clearly willing to pay full price to get those items," said Janet Hoffman, global managing director of consulting firm Accenture's retail practice.

Hoffman cited smartphones as one example, despite their sometimes lofty price tags.

Those smartphones also can help retailers make sales even without bringing customers into the store.

For example, department store chain Kohl's Corp (KSS.N) has launched a mobile version of kohls.com website this holiday season.

"We're trying to move to where the customer is more aggressively," said CEO Kevin Mansell. "The rationale is that it's all about convenience -- the consumer wants total freedom."

(Additional reporting by Alexandria Sage in San Francisco and Dhanya Skariachan. Phil Wahba and Jon Lentz in New York; Editing by Michele Gershberg and Steve Orlofsky)

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