Can Deep Discounts Save Retailers?

We’ve come across two articles this morning discussing how retailers will have huge sales this month to lessen the impact of what might be one of the worst holiday seasons ever. A shocker. We know.

In both reports, analysts are saying that the likelihood is dim that these discounts will improve the retail landscape. More store closures and bankruptcies are forecast.

“I’m not optimistic,” Michael Niemira, the International Council of Shopping Centers’ chief economist told the Detroit News. Well, few people are nowadays.

But the article did have one bright spot. Apparently, sales at Mall of America were up 2% this year.

Will discounts by the major chains bring similar results and give companies a boost? Or is discounting a bad idea that can only hurt margins?


6 Responses to “Can Deep Discounts Save Retailers?”

  1. 1 deborah January 5, 2009 at 10:52 am

    NO! This will never be enough. We are in for many more closings and bankruptcies in 2000 and 2010 as well. Yes, retailers ‘over’ expanded cutting into their own markets but the government, together with our private banking industries, have created a landslide that is far from over.

  2. 2 ColnagoMan January 5, 2009 at 2:33 pm

    This is purely anecdotal. But, I decided to do my part to save the economy by going to a suburban Regional Mall January 2nd. It was a zoo. The parking lot was full. People were actually carrying shopping bags. And, there were long waiting lines to make purchases! Dillards’ shoe department said it was the busiest day they had ever experienced. In Men’s suits, the manager said that the sale of suits was setting a one-day record. I made purchases in both areas, and in each case the clerks were apologizing because they had no more sacks. Admittedly, there were very deep markdowns. At any rate, deep discounts are moving merchandise at department stores near me.

  3. 3 MITCHEL January 5, 2009 at 6:05 pm

    The question to ask is if Retailers can discount 50% to 75% to save their month, then we know we are paying too much in the first place if we shop retail.

  4. 4 will January 6, 2009 at 10:51 am

    So, if 160,000 stores closed in 2008, what is the statistical norm, say over the last 5 yrs.?

    How many stores are there, nationwide, in retail inventory?

    Presumably, there is annual inventory change = total new store openings, total store closings due to lease expirations, bankruptcy, early terminations, etc., and new store openings = net change in total stores!

    Does anyone have access to statistically relevant information from which to evaluate the severity of the 2008 numbers and 2009 projections?

    Please provide source of data!

  5. 5 James January 6, 2009 at 4:31 pm

    Deep discounts will only deal with the inventory problem, what will they do for Act II, the replenishment side?? This is not sustainable over the long haul.
    Since I am in a radical mood may I suggest It maybe more efficient to close the store a few days a week, say Sunday and Monday and maybe shorten hours on other days, lower overhead costs, renegotiate the lease, etc. Hunker Down.

  6. 6 RayMan January 16, 2009 at 3:36 pm

    Spot on James! Deep discounting is not a solution. It zaps future demand along with current inventory.

    For obvious reasons, capital flows to businesses with reduced or marginal labor costs. Underemployment is up, but part-timers don’t buy houses. I live in Florida, a state that is 51st out of 50 states plus D.C. when it comes to retirement benefits.

    Look around the office; do you own anything that’s American-made? We’ve lulled ourselves into believing that we could sustain history’s preeminent economy, middling on foreign labor. The only markets that consider “Made in the U.S.” a symbol of quality are Latin American, and most of those now buy Chinese-made goods.

    I recently asked a good friend from Georgia what they manufactured in his state, and after a few seconds of phone silence the reply came back, “peanuts”.

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