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Several seasons of discounting have hardened consumers against paying full price – much to the chagrin of retailers, who still face narrow margins and lean inventories.
It is a Catch-22: retailers would like to see a return to full prices in order to increase those margins, but skittish consumers need markdowns to entice them to buy.
"I don't think any consumer will get up any time soon and say, 'I think today's the day I want to pay more than I have to,'" says James Dion, president of retail consultancy Dionco, Inc., Chicago. "Retailers really do eat their young. We have created this monster, and this monster is called discount."
BDO USA's Al Ferrara, partner and national director of the firm's retail and consumer products practice, says retailers did indeed spoil the American consumer.
"In the 'new normal,' full price doesn't exist,” Ferrara says. "People have come to understand no one buys anything at full price anymore."
As it turns out, 68% of U.S. consumers buy apparel on sale, according to the Cotton Incorporated Lifestyle Monitor™ Survey. Meanwhile, 48% of shoppers -- including 60% of women and almost 30% of men -- say they "love or enjoy" clothes shopping. But perhaps what they really love is the art of the deal.
Barney Bishop, public relations director for Wurkin Stiffs' men's accessories, says the recession only furthered a process begun years ago by retailers.
"The economy helped cement this 'new normal,' where consumers routinely wait for prices to drop before they purchase. It will be interesting to see how that evolves once the economy starts trending back upwards."
Retail's luxury sector has already experienced an upswing. The high-end stores that resorted to massive price slashing when Wall Street crumbled have pulled back on discounting as upper-income shoppers regained confidence -- and their year-end bonuses.
"Luxury did well over the holidays in keeping prices at or near full price," Wyss says. "They do well with labels that have cache and a perceived quality. That's the magic formula for luxury -- creating that aura of quality and uniqueness.
"In fashion, brand image is a significant factor in determining how much consumers want to spend," he continues. "Moderate apparel is caught in the middle, because their prices are higher than discounters. But there's not enough uniqueness to qualify higher prices. That's why we saw a lot of promotion and discounting at the mid-level department stores over the holidays."
Nearly a quarter of consumers shop for most of their clothes at chain stores (24%) and mass merchants (24%), followed by department (13%), specialty (12%) and off price (8%) stores, according to Monitor data.
Over the past few years, the Monitor survey finds that, in general, consumers have been consistent in shopping for apparel twice a month in stores and once per month online.
In order to increase those numbers, retailers have to think about exclusives, analysts say.
"Macy's has seen good returns because its exclusive product creates value, and an interest and demand in the product based on the celebrities getting involved in its promotion," Wyss says. "Also, the luxury brands have helped themselves by extending down a tier or two, like going from Armani down to A/X. The trick is to keep the aura while creating items in different categories and price points that aspirational consumers are going to look for and demand."
Ferrara says, "For department stores to be successful, it has to be about having a favorable customer experience, offering good value and showcasing brands through boutique stores in the store."
Over half of consumers (52%) say brand name is an important factor in their apparel purchase, while 92% say the same for price, Monitor data show. This might explain why stores’ endless sales -- not to mention off-price stores and flash sale sites -- hold such appeal. On average, consumers spend $53 each month, down significantly from $58 in 2010, $63 in 2009, and $73 in 2008, according to the Monitor.
This demand for discounts drove JC Penney's recent bold move of lowering all prices by 40% every day. Dion questions this strategy.
"Walmart can offer everyday low prices because it has consumables -- things you need, not want -- like dog food and diapers. So while you're getting those things, you pick up a few other items. How many consumables does JC Penney have?"
Instead of focusing so much on price, Dion says, retailers would do well to focus on product.
"In America, everything is in fashion," Dion says. "You can argue that Mad Men brought back fashion. But there still are mini skirts, skirts to knees, people wearing pajamas in public.... Retailers have a really hard time giving a point of view. So they say, 'It's $49.99 -- that's why you should buy it.'" Dion adds that Target's designer collaborations have shown that fashion does not have to be expensive - just well done - for people to respond.
"Chasing price is chasing your tail,” he adds. “There's no future to it."
This article is one in a series that appears weekly on WWD.com. The data contained are based on findings from the Cotton Incorporated Lifestyle Monitor™ Survey, a consumer attitudinal study, as well as upon other of the company’s industrial indicators, including its Retail Monitor and Supply Chain Insights analyses. Additional relevant information can be found at CottonLifestyleMonitor.com.