Blue Xmas for some retailers

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Retailers pouting over a stocking full of coal this holiday season haven't hit upon any marketing magic to make the season bright.

Department stores fired off some of their most powerful marketing weapons early this season with big promotions. But despite discounts of 50% and more, retail sales on the days after Thanksgiving were lackluster and followed predictable patterns for the post-Sept. 11, economically troubled season. Discounters Wal-Mart Stores' Wal-Mart and Target Corp.'s Target, and department store/discount hybrid Kohl's drew customers. But specialty stores, such as the Gap and others located in traditional malls, continued to struggle.

Some experts question whether the steep early promotions went too far. "The consumer is showing that if you give them something they want, they will pay full price for it," said Richard Baum, senior retail analyst at Credit Suisse First Boston.

"Everybody blinked and lowered prices quicker" than may have been necessary, said Tom Holliday, president of the Retail Advertising & Marketing Association, a division of the National Retail Federation, adding that retailers were "doing better than they thought."

Discounting aside, one of the most effective marketing moves of the holiday season was the fashion show on Walt Disney Co.'s ABC for Victoria's Secret. At a reported cost of $6 million, the lingerie retailer's show drew extensive publicity as well as 12.4 million viewers, and a robust Nielsen Media Research 4.4 rating and 10 share among adults ages 18 to 49. Another part of the marketing effort, quiz show "Who Wants to be a Millionaire"-featuring Victoria's Secret supermodels-that led into the runway show, drew 11.8 million viewers, "Millionaire's" largest audience this season.

The viewership success was reflected at the cash register. Victoria's Secret sales for the four weeks ended Dec. 1 were up 9%. Overall sales for Victoria's Secret's parent Intimate Brands, however, were down 6% due to a poor showing at sibling chain Bath & Body Works. Victoria's Secret advertising is done in-house.

Another mall retailer continued to fire marketing blanks, compounding its merchandising headaches. Gap Inc., which owns the Gap, Old Navy and Banana Republic chains, saw same-store sales drop 25% in the four weeks ending Dec. 1, the 19th month of decline. Disappointing holiday advertising efforts were noted in the Gap's conference call with analysts. Gap stores' advertising is handled in-house and on a project basis with Modernista, Boston.

"The Gap is a disaster," said Kurt Barnard, president, Barnard's Retail Trend Report, adding he believes the chain is past its prime.

Meanwhile, Target breaks new work Jan. 20 from Peterson Milla Hooks, Minneapolis. The effort includes two branding spots with a take on its "Sign of the Times" creative, along with a Club Wedd spot.

Whether it's fear of terrorism or concerns about money and jobs, consumers have shied away from traditional malls, retailers such as Intimate Brands have told Wall Street. Instead, consumers have flocked to strip malls and big box stores with quick and easy access.

Lackluster marketing wasn't retail's only problem. Pressure from Wall Street to cut advertising and protect the bottom line hurt as well. "There's no question a pullback in advertising is going to impact [retailers] adversely," said Ellis Verdi, president, DeVito/Verdi, New York. Kmart Chairman-CEO Charles C. Conaway acknowledged to analysts that its cutback in advertising spending had been a mistake (AA, Dec. 3).

Online shopping, meanwhile, appears to be keeping up with last year's growth, up 59% for the week after Thanksgiving to 117 million shopping trips, close to last year's 62% jump, Nielsen/NetRatings Holiday eCommerce Index indicated.

As if terrorism, layoffs, unseasonably warm weather and belt-tightening weren't enough for retailers to contend with, a study by United Mileage Plus Visa Card Shopping Index suggests a troubling new wrinkle in American gift-giving culture.

More than half of Americans, 53%, plan to participate in "regifting"-that is, taking a present given to them and passing it along as a gift to a third person. "The fruitcake," said Doug Filak, senior VP-marketing, First USA, "does come back."

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