November 21, 2012

Big chains borrow from fast-food industry's playbook

The ease of ordering online and the sluggish economy has created more demanding U.S. consumers who aren't impressed by discounts alone.

Mae Anderson / The Associated Press

NEW YORK — This holiday season, Burger King won't be the only place where you can have it your way.

click image to enlarge

A customer shops at a K-Mart in Chicago. If the economic downturn has taught retailers anything, it's that a 50 percent off sale isn't enough to lure finicky American shoppers into stores these days

AP

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It used to be enough for stores to promise discounts of up to 70 percent off to lure shoppers during the busy holiday shopping season. But the ease of ordering online and the sluggish economy has created more demanding U.S. consumers who aren't impressed by discounts alone. They want their shopping just like their fast food: not only cheap, but convenient too.

That means they're no longer afraid to walk away from the cashmere sweater with the perfect fit if the store is crowded. They're also unwilling to buy those suede pumps that are just the right shade of blue if they have to pay to get them shipped. And they cringe at the prospect of carrying a bunch of paper coupons; they'd rather be able to pull them up electronically on their smartphones.

Retailers from Wal-Mart to Macy's are doing everything they can to make it easier for this new crop of finicky shoppers to spend their money during the busy holiday shopping season. Several are opening on Thanksgiving Day. Some are offering free layaways and shipping. Many are matching in-store prices with cheaper online deals. And others are allowing shoppers to buy online and pick up their merchandise in stores.

It's the latest effort by stores to court shoppers like Patty Edwards. Four years ago, Edwards, who lives in Bellevue, Wash., bought all of her holiday purchases at online retailer Amazon.com because she thought it was the easiest way to shop. But this year, she plans to shop elsewhere because there are stores are offering more shipping options.

"Now I'm not necessarily tied to Amazon," said Edwards, a retail analyst and principal at investment firm Trutina Financial. "I can go to Nordstrom, Saks or Target and have stuff available to pick up. It's a pretty simple process. That wasn't the case four or five years ago."

The have-it-your-way approach is partly a response by merchants to their fear that shoppers will spend less freely this season over worries about high unemployment and a package of tax increases and spending cuts known as the "fiscal cliff" that will take effect in January unless Congress passes a budget deal by then. It also comes as the growth of smartphones and tablet computers have made it easier for shoppers to browse and buy with the touch of their fingertips. No need to battle long lines at The Gap when you can just Google what you want.

That puts pressure on brick-and-mortar retailers, which count on the holiday shopping season for up to 40 percent of their annual revenue, to find ways to get shoppers into their physical stores. That's becoming an increasingly difficult feat: The National Retail Federation, an industry trade group, estimates that overall sales in November and December will rise 4.1 percent this year to $586.1 billion, or about flat with last year's growth. Meanwhile, online sales are expected to rise 15 percent to $68.4 billion, according to Forrester Research.

"Retailers have to do a little more to grow sales this year," said Frank Badillo, a senior economist at consultancy Kantar Retail.

This isn't the first time stores have had to up the ante. Big sales and door busters like deeply discounted TVs used to be the hallmark of the winter holiday shopping rush. But stores noticed over the last several years that Americans were cutting back on spending during the economic downturn, so they ramped up their discounting even more.

Shoppers became addicted to the ever bigger sales. And they began fleeing to online retailers, which can offer much cheaper prices than brick-and-mortar stores because they don't have the overhead costs of operating physical locations. Shoppers also began to appreciate something else about online retailers: They offer them the convenience of being able to shop within the comfort of their homes or office cubicles.

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