NEW YORK — When it comes to reeling in consumers this holiday season, price is the object.
This story first appeared in the December 12, 2002 issue of WWD. Subscribe Today.
A two-page Macy’s ad in The New York Times recently drove that theme home. It had all the hallmarks of a Wal-Mart campaign with Macy’s adopting the lingo of a discounter, using phrases such as “doorbusters” and “red-star specials.”
Placards throughout the store identify “Best Savings,” Macy’s new handle for rock-bottom prices. The placards list an item’s regular price, its price in a previous sales event and its drop-dead price. For example, an item regularly priced at $25 and previously marked down to $11.99 is offered at the Best Savings price of $9.99. Wouldn’t it be easier to just stick a 40 percent off sign on the product?
It’s a jungle out there and Macy’s just wants to get its fair share of the holiday pie.
As does everyone else. For jewelry retailers, December accounts for 22 percent of yearly sales. For department and specialty stores, the figure is between 14 and 16 percent. But stores count on the fourth quarter for the bulk of their profits.
“So much of the profitability of a company comes in the last days of the year,” said Allen Questrom, chairman and chief executive officer of J.C. Penney Co. “How do you get your cost structure down so you can make money? The fourth quarter represents from 40 to 70 percent of people’s profits.
“There’s more competitors and it’s not just the retailers,” Questrom said. “In order to make a profit, you have to be more and more creative and more sensitive to cost structures.”
Penney’s planned conservatively, estimating a 2 percent gain. Questrom said sales have been running on plan or slightly better.
Robert Mettler, chairman and ceo of Macy’s West, said that if achieving the chain’s goals means being promotional, then so be it. His only caveat is staying true to the company’s target customer.
“The worst thing is to chase transient customers or customers that are not part of your whole long-term vision,” he said. “Some stores have built an unnatural business by changing who they are during Christmas. Part of it is when they promote abnormally, part of it is when they change their assortments to bring customers in, based on sheer traffic, and part of it is how-low-can-you-go pricing.”
Not surprisingly, Wal-Mart, the world’s largest retailer, wants its rightful share of holiday business and then some. “We promote our everyday low prices very heavily,” a Wal-Mart spokesman said. “We’re competing like heck on price. We expect it to be a good Christmas. We expect to get our fair share of the market and perhaps a little bit more.”
Michael Gould, Bloomingdale’s chairman and ceo, tried to strike a decorous note amidst the heated selling frenzy.
“We honestly believe we reduced the promotions after Thanksgiving and the business was very good,” Gould claimed. “Part of our brand strategy is to reduce promotionality. We need to clientele better and make stores easier to shop, which we’re doing. Christmas is not growing in importance as we grow other parts of the business. We’re a year-round store.”
For jewelers such as Tiffany & Co., however, the fourth quarter represents 35 percent of yearly sales.
Zale’s is also heavily invested in the holiday, but is trying to shift emphasis to other occasions such as bridal. Zale’s is also trying to capitalize on mall traffic generated by July 4 and Memorial Day, a spokesman said.
But consumers have been conditioned to shop for sale merchandise year-round. Holiday gift certificates are on the rise, as is their redemption in January, when there’s the anticipation of still more sales.