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Retailers cut inventory to
address shift in consumer
spending
Stores are reducing inventory and
offering fewer pricey items as strapped customers slash
their spending.
Associated Press
January 21,
2009
New York -- For years, retailers
could afford to be sloppy about running their businesses
because customers kept buying.
No more.
Stung by the worry that shoppers -- who cut spending
by the most dramatic amount in at least 39 years this
holiday season -- may not start spending again for a
long time, stores are making drastic changes. They are
cutting out marginal suppliers, hiring outside experts
to keep inventory lean, holding special events for those
who are still buying and making extraordinary efforts to
gauge customer satisfaction.
The new discipline will be mostly good news for
shoppers, who will find stores less cluttered and see an
array of products at lower prices, including groceries
and jeans from brands they could once only aspire
to.
Of course, the downside is that consumers who want
something out of the ordinary -- an olive green prom
dress, for example -- may have to look harder. Stores
are rooting out offbeat, unpopular colors and styles,
which will mean fewer choices.
Sales clerks are also checking back with customers to
see whether they're satisfied with their purchases.
"We are in a sea change," said Millard "Mickey"
Drexler, J. Crew Group Inc.'s chairman and chief
executive.
Pricing goods within reach of strapped consumers is
also a big focus, given the way nervous
consumers
have stopped shopping. Same-store sales, or
sales at stores open at least a year, fell 2.3% in
November and December combined, according to the
International Council of Shopping Centers. And the
worsening sales slump in January has many worried about
the industry's prospects over the next few months.
J. Crew is working with its factories to adjust its
prices on certain key items such as ballet flats, which
now start at $98 rather than $118. It's also stocking
fewer of its high-priced items, such as $1,300 leather
trench coats, and slashing expenses.
Status denim brand Rock & Republic will ship a
new Recession Collection this spring that runs about
half the usual $200 price tag for its jeans.
Even supermarket chain SuperValu Inc., which operates
stores including Albertsons and Bristol Farms, has
promised lower everyday prices on groceries and more
promotions.
Chief executives from such companies as Crate &
Barrel and J.C. Penney Co. acknowledged during the
National Retail Federation meeting this month that they
were navigating new territory, predicting that the
fundamental shift by consumers to spend less and save
more would linger.
The biggest unknown is when or whether shoppers will
ever resume spending the way they did when the housing
market was booming, credit was easy and jobs were more
plentiful.
"Customers wanted and wanted and wanted some more and
we sold and sold and sold some more," said Burton M.
Tansky, president and CEO of Neiman Marcus Group. Now,
"frugality is more important."
This sudden hibernation of customers is leading even
the luxury retailer to try new strategies. Neiman Marcus
is eliminating some vendors and focusing on serving its
best customers. It's trying to retrain its shoppers to
buy regular-price merchandise by throwing more smaller
private events for 20 to 30 customers.
Weaning customers off discounts is a big challenge
for the industry because people have gotten used to them
-- particularly on luxury brands that hadn't been
discounted before sales all but dried up.
For the last two years, many of the nation's best-run
stores such as J.C. Penney had been reducing inventories
in response to the consumer spending slowdown.
But no one anticipated the severe retrenchment that
hit in September as the financial meltdown ravaged
shoppers' retirement accounts, reduced credit
availability and resulted in massive layoffs.
As shoppers simply stopped buying, stores were forced
to discount items by as much as 75% in some cases even
before the official start of the holidays -- resulting
in the weakest season since at least 1969, when the
shopping center council began its index.
Some companies, such as KB Toys Inc., couldn't make
it through the Christmas season, and many more are
expected to file for bankruptcy in the coming months.
Circuit City Stores Inc., which filed for Chapter 11
bankruptcy protection in November, said Friday that it
would go out of business -- closing its 567 U.S. stores,
after not being able to work out a sale.
Continue Article
http://www.latimes.com/business/la-fi-retailers21-2009jan21,0,5085360.story?page=2
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