'Tis the season to trim promos

By Published on .

If consumers think they're getting off cheaply this holiday season, they're in for a surprise.

Retailers are trying to cut back on price-cutting promotions this year, and plan to rely more on exclusive and private-label merchandise and brand advertising to drive traffic. After a disappointing back-to-school season, retailers are betting full-price merchandise will help. After all, the Thanksgiving-to-Christmas stretch accounts for 23% of annual sales, according to the National Retail Federation.

It's still going to be a hard slog to Dec. 26, even with two extra shopping days between Thanksgiving and Christmas, the experts predict. Seesawing consumer confidence and iffy economic readings are putting a cork on the holiday exuberance and spiraling oil prices will cause heating-bill sticker shock among households in the colder regions.

"We see a choppy economy. We still see consumer demand, but it's not consistent," said Michael Linton, chief marketing officer, Best Buy.

But if those wary consumers expect bargains, they may be mildly disappointed. Door-buster specials are still planned to create lines outside stores at 6 a.m. the day after Thanksgiving, but retailers are vowing to walk a fine line on discounting, finer than in past years. Smith Barney retail analyst Deborah Weinswig noted Wal-Mart Stores has been open about wanting better pricing this season.

"They're saying, `We're not going to sell DVD's at half price,' " she said. Given Wal-Mart's dominance, that bodes well for all retailers, she said.

Many retailers have broken branding efforts for the holiday with bargain prices conspicuously absent. Troubled retailer Toys `R' Us is promoting itself as the "joy store" for the holidays; Best Buy is promoting an exclusive tie-in with singer Elton John's new DVD box set and Circuit City is pushing digital products in its TV ads.

dialing it down

"We'll still be a bit promotional, but are we trying to dial it down? Yes," said Justin Lewis, VP-marketing, Circuit City Stores. It's a balancing act: "We're trying to control the amount of promotion out there, but people expect prices to come down."

The holiday season now stretches past Christmas, thanks to the popularity of gift cards-a Deloitte & Touche survey found 64% of shoppers plan to buy them this year-so merchandise will be moving well into January, further reducing the need for post-holiday blowouts.

So retailers plan to focus on branding themselves and pushing exclusive merchandise. With no Tickle-Me-Elmo or PlayStation as the must-have product, stores will focus on private-label merchandise to differentiate themselves. Ms. Weinswig noted JCPenney set the tone with its back-to-school advertising, which focused entirely on its private-label apparel.

Retailers are feeling confident, said Michael Gatti, exec VP of the Retail Advertising and Marketing Association. After the back-to-school disappointment, sales in September and October were better than expected, he said; he noted an October retailer survey found a new confidence that their pricing will hold.

breaking habits

"It's always `who blinks first,"' Mr. Gatti said. "This year, they may not be blinking."

But, with all their confidence, it will be hard to break consumers' habits, said Robert Passikoff, president of consultancy Brand Keys. His survey found only 8% of consumers plan to spend more this holiday season, and that's two points lower than last year.

Consumers became used to markdowns during the recession and those habits won't break in a couple of months, Mr. Passikoff said. Besides, he added, the fourth quarter is too important to retailers to risk losing sales to change consumer habits.

"There's an interesting lesson for retailers: It's their own marketing that taught consumers what to expect," he said. "Consumers won't see a few commercials, slap their foreheads and say `I've been wrong; let me go buy by brand."'

Most Popular
In this article: