California Apparel News

’Tis the season to dazzle consumers with big discounts and generous gifts.

But many retailers are finding that one size does not fit all when it comes to promotions and making the most profit during this Holiday shopping season.

Many specialty stores, for example, said that promotional campaigns like those used by discounters and department stores to draw customers in droves on Nov. 26 could damage their bottom line. The date, dubbed Black Friday, marks the traditional start of the Holiday shopping season.

“There’s no formula that works for everybody, because there are so many different segments and demographics,” said retail analyst Liz Pierce, who works at the Los Angeles office of financial services firm Sanders Morris Harris Group. “The customer is very deal sensitive. The retailer must be skilled to stage deals and gimmicks so they can stay on customers’ minds.”

The tricky task of building promotional traffic comes at a time of solid economic growth and an increasingly sunny consumer outlook.

On Nov. 29, the Consumer Confidence Index, charted by the New York–based Conference Board, bucked a two-month decline when its November numbers increased to 98.9 percent from 85.2 in October. A representative of the nonprofit market research group said a decline in gas prices and an improving job market had boosted consumer confidence in time for the holidays.

Some analysts expect 2005 Holiday spending to increase over 2004, but the margin of increase might not top 2004’s Holiday season. According to a forecast by financial services company Ernst & Young, the 2005 Holiday season should reflect a 6 percent increase in sales over the 2004 Holiday season. Yet the 2004 Holiday garnered an 8 percent increase in sales compared to the previous year.

Waning Holiday spending is rooted in stress caused by this year’s skyrocketing energy prices, higher interest rates and a slowdown in the growth of disposable personal income, said Aubie Goldenberg, a Los Angeles–based partner in Ernst & Young’s Retail Group.

The Washington D.C.–based National Retail Federation also forecast a 6 percent increase in Holiday sales over the previous year. The forecast, released Nov. 22, was revised from the NRF’s initial forecast, released in September, that projected a gain of 5 percent. The forecast was revised because of strong retail sales in October and the decrease in gas prices, according to an NRF statement.

Discount-driven crowds

Crowds looking for deep discounts and gifts on Black Friday helped to kick off this season of expected solid, if unspectacular, growth. Wal-Mart estimated a record-breaking 10 million people shopped at their stores around the United States on Nov. 26.

The Glendale Galleria shopping center estimated that 350,000 people shopped at the Glendale, Calif., mall on Black Friday to take advantage of deals on items including toys, electronics and clothing. The mall’s new Disney Store offered 20 percent discounts. The Robinsons-May store offered $15 gift cards to the first 300 to 500 people who walked through the doors after 6 a.m. Macy’s attracted crowds by offering more than $1 million in prizes.

Specialty retailers joined the frenzy of promotions at the Galleria. Victoria’s Secret gave consumers a gift bag filled with beauty products. Express gave women purses and men knit caps and scarves with purchases, according to Janet LaFevre, the Galleria’s senior marketing manager, who said retailers tried to stand out from the crowd by supplying something different to consumers.

“I’m not sure promotions were bigger this year,” LaFevre said. “Retailers had to be more creative than in past years.”

When it backfires

If mall-based retailers ratcheted up the creativity of their promotions, boutiques outside the mall found that promotions didn’t necessarily work for them.

Lara Dean-Fernandez, co-owner of The Assembly boutique in San Diego, Calif., decided to experiment with promotions on Black Friday. She posted a “Sale” sign on her boutique door only to have her profit margins drop by 20 percent.

“The sign attracted a different kind of customer,” Dean-Fernandez said. “It was a younger crowd. They were more about the sale than the quality of the item.”

In years past, a loyalty promotion didn’t attract customers to Beach Bums, a 13-store chain based in Anaheim, Calif. Cliff Haddadin, the chain’s chief executive, said he pulled the program two years ago after it failed to increase traffic.

His customers flock to his store to buy the latest from brands such as Volcom, Krew and Matix. He said most of the key items for the season, such as the Asher jacket by Torrance, Calif.–based Matix, were sold out by the first week of November. The chain’s biggest challenge for the remainder of the season will be reshuffling inventory, he said.

“The top of the line in one brand may not be available. But consumers may often take the next-best thing,” Haddadin said. “We’ve been dressing mannequins in the next-best thing every couple of weeks.”

Other retailers are expanding their promotional programs with an eye to increasing future sales. Fred Levine, co-owner of the 23-store Agoura Hills, Calif.–based M.Fredric, said his company started a gift-card loyalty program earlier this year. He hopes these cards will stretch the gift-buying season until late January.

To boost January sales, Levine ordered Spring 2006 garments for a Dec. 30 delivery date instead of the typical Feb. 28 delivery. With fresh inventory in store, he is betting customers will spend more than the amount guaranteed by their cards.

“We want them to spend on the whole outfit, but it’s got to be the right stuff. If they have a $50 gift card, they’ll end up spending $300. If all you have is markdowns, they’ll just spend as close to the $50 as they can,” Levine said.

Levine said he would notify his gift-card holders of the early deliveries of Spring fashions with e-mail blasts, calls from sales staff and direct mailers. Such customer relationship–building measures are growing in popularity for luxury stores, Ernst & Young’s Goldenberg said.

“It makes sense. Why buy a billboard on Sunset Boulevard when I could target a consumer who already proved their interest by shopping in the past?” he said. Improved technology is making it easier to maintain consumer databases, which has made this strategy more attractive, Goldenberg added.

Competitive promotions

However, a retailer may feel obligated to employ certain promotions if everyone in the market is offering them. E-commerce Web sites are in a race to see who can provide the cheapest and fastest shipping for customers. Don Daszkowski, owner of Web site Daszign.com, said online customers have become so accustomed to free shipping, they now expect it.

Although he admitted being peeved by the practice, he’ll offer free one-day shipping the closer it gets to Christmas. “We don’t run too many promotions, outside of our cadre of good customers,” Daszkowski said. “But online is so competitive, we’ll give certain incentives.”

With four more weeks of Christmas and Hanukkah shopping left to go, retailers will have plenty of time to consider how promotional they want to be, Pierce said. Predictably, she advised not to give away the shop through markdowns. Rather, she recommended maximizing profits with loyalty programs.

“My concern is that retailers will panic and work irrational markdowns,” she said. “No retailer wants to sit with inventory.”