How Low Can You Go?

Retailers are panicking as shoppers flee high-ticket items like administration officials fleeing the cabinet.

America's merchants, shocked by a mediocre post-Thanksgiving weekend, are rushing to mark down their merchandise - way before the majority of holiday shoppers have even seen it.

At the beginning of November, merchants had reduced prices on 5 percent fewer of their goods than last year, according to John D. Morris, a retail analyst with Harris Nesbitt who keeps an annual holiday markdown index. "There's been a complete about-face," he said yesterday, speaking from the Garden State Plaza mall in Paramus, N.J. "By the end of Sunday, markdowns were 5 percent higher than last year - and judging by what I see tonight, that figure is accelerating."

At the start of November, "everything was coming up roses," he added, "and suddenly there's a foul smell in the air."

I wonder why. Could it be that at least half of the nation saw hope in an electorate seemingly poised to do an about-face and take a step in the right direction, when suddenly millions of Christians crawled out of their Jesus huts and reminded we sinners that the state of the union rests not on a sound economy or strong defense, but on not allowing the gays to marry, damn it?

After the numbers from Thanksgiving weekend were counted, retailers realized that shoppers bought only what was drastically discounted. "They didn't buy the whole store," said Burt Flickinger III, managing director of the Strategic Resource Group in New York. "Now, to stimulate the consumer, the stores must go broader and deeper." In the last few days, repeat shoppers at a wide variety of stores - from Restoration Hardware to J. C. Penney - have been deluged with e-mail messages offering friends-and-family coupons for as much as 40 percent off this weekend. Department stores like Lord & Taylor and Bloomingdale's are already running supersales, their racks dotted with signs proclaiming 20 to 40 percent discounts.

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Ahead of the holidays, most retailers said they would be able to hold the line on prices because they had spent the last two years slimming excess inventory. But they have apparently guessed wrong, worrying that they will be left with too much stock in January.

The question is whether these merchants will succeed in time for the holidays.

Mr. Flickinger said he thought there was still time, though not much, for the merchants to end up happy with their holiday receipts. "They only have 5 to 10 days to turn it around or it'll be too late," he said. The way to do this, he said, is to advertise, he said. "They should be advertising in four-color supplements and on drive-time radio."

He added, "The ones that discount the deepest, the fastest will have the most success."
Wal-Mart stumbled, he said, "because although they were selling fondue sets for $4.77, when they should have been offering deeper deals on digital cameras and flat screen TV's."

Ms. Mager, at Goldman, Sachs, also said she thought time was running out.

"How much later can they respond?" she asked. "There's not much you can do to change the game plan now: the major promotions have been scheduled; the clothes are in the warehouses or the stores - the only thing you can change is the prices - and keep your fingers crossed."