VOL. 123 | NO. 154 | Thursday, August 7, 2008
Retailers Amp Up Promotions for Back-to-School
By MAE ANDERSON | AP Business Writer
NEW YORK (AP) - Retailers preparing for a difficult back-to-school season are getting creative in their attempts to entice shoppers into the stores - aggressively introducing new products, slashing prices and amping up marketing in the battle for parents' bucks.
But analysts say their efforts will likely make little difference to consumers pressured by rising costs, who will likely stick to shopping at discounters — particularly as tax-rebate checks dry up and they aren't finding "must-have" fashion items in the stores.
"It will probably be one of the two or three most disappointing back-to-school seasons this decade," said retail consultant Burt Flickinger III, managing director of Strategic Research Group. "It will be very promotional. Consumers are more cash- and credit-constrained than any other time in U.S. history."
Just how skittish shoppers are feeling will be seen Thursday when many retailers report their July sales for stores open at least a year. A weak back-to-school season may signal trouble for the all-important holiday season, which begins not long afterward.
But while consumers may not see a new backpack or pair of jeans as essential this year, retailers are trying whatever they can - slashing prices of selected items, offering cash back or discounts on additional items, running some promotions at certain times of day.
"We assume it's going to be a very difficult customer environment so from a sales and promotions standpoint we'll be extremely competitive," said Mike Boylson, chief marketing officer at J.C. Penney Co.
The department store chain is also introducing six new lines aimed at teens and young adults during the season, compared with last year, when it introduced only one.
Patricia Edwards, an investment manager at Wentworth Hauser and Violich in Seattle, said the atmosphere was the most promotional she has seen in five or six years.
"Frankly, it smacks a little bit of desperation to me," she said. In terms of department stores such as J.C. Penney or Kohl's Corp., "the problem right now is traffic," Edwards said. "Wal-Mart has a captive audience because of the food they sell. People are already there so it's a little easier for them."
That's the case for Michelle Portillo, a public relations manager at National CineMedia in Centennial, Colo., and the mother of an 8-year-old and 4-year-old, who says she is "dreading" the back-to-school season.
"I just don't have the disposable income I had last year" because of rising costs, she said. For her daughter who is entering third grade, Portillo bought a dress for the first day of school, but plans to hold off on buying any more clothes.
"I will purchase a new backpack from Wal-Mart with all her school supplies, but nothing else will be new at the beginning of the school year," she said.
Another problem experts cite is a lack of "must-have" fashion trends. Old favorites such as jeans and T-shirts are likely to be among the biggest sellers.
"There's an absence of anything new in fashion," said Marshal Cohen, chief retail analyst at NPD Group.
To get people past that thinking, retailers are going beyond any usual price cuts. Gap Inc. is expanding its "friends and family" discount program. American Eagle Outfitters Inc. is offering a free T-shirt to anyone who even tries on a pair of their jeans.
Some stores are also offering to cover the taxes on people's purchases. American Eagle is offering a discount to Florida shoppers, since their "tax-free" shopping week was canceled this year. Circuit City Stores Inc. plans to absorb the cost of state and local sales taxes for purchases at its California stores during two days in August.
Retailers are also changing their marketing to focus more squarely on prices. Last year, Staples Inc. emphasized its wide variety of products in its back-to-school marketing. Now it's offering free or nearly free items like pencil holders for a penny. In one ad, a woman attempts to use Staples' "Easy" button at a gas pump in an attempt to lower the $92.50 price for filling her tank, but the button doesn't work. A voiceover informs her the "Easy" button only works to lower prices at Staples.
"We recognized pretty early on the economic environment had taken a bit of a shift," said Teresa Herd, Staples' vice president and creative director. "We looked at what people are experiencing: pain at the pump, pain when we go to the grocery store."
Office Depot Inc.'s promotions - free products and items like pencil sharpeners and rulers for a penny - are similar to previous years, but this year the difference is the scope and assortment. New items are offered each week until Sept. 1.
Despite the glut of promotions, analysts says shoppers are likely to flock to discounters known year-round for low prices such as Wal-Mart Stores Inc., Target Corp., warehouse clubs like Sam's Club and Costo Wholesale Corp.
Those stores have benefited as consumers trade down amid rising living costs and consolidate shopping trips to save money on gas. The retail sales reports due out tomorrow are expected to show even a bigger disparity between them and mall-based clothing stores.
But the discounters are joining the fray as well. Sam's Club is offering a $15 gift certificate to college students who sign up. Walmart.com is chasing the same market, offering free shipping on many items and a special online gift card promotion.
In the end, Edwards said, while some retailers may be disappointed with back-to-school results, "one way or another, children will be clothed and have crayons and notebooks for back-to-school, because they have to."
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