Retailers Holding Line on Margins

Dec 14, 2004

By George Anderson

For every hot toy or electronics gadget that gets discounted in the run-up to Christmas, there are other products that stores are marking up as retailers try to come out of this holiday season with higher profits to show for their efforts.

Two research studies reported in a Chicago Sun-Times article, one by Prudential Equity Group and the other by FTN Midwest Research, confirm this.

The Prudential research analyzed market baskets of shoppers at Wal-Mart, Target, Sears, Best Buy and Circuit City. It found that even items originally offered on a loss-leader basis saw their prices increased as the holiday season has progressed.

Sears’ spokesperson Chris Brathwaite said it has taken a “door-buster” strategy for the holiday season with earlier store openings and “early bird” specials.

Prudential’s research found that Sears tagged 33 electronics items at a lower price than Wal-Mart in its initial survey on Oct. 25. Six weeks later, Sears’ price for these same items was 0.9 percent higher than Wal-Mart.

The study conducted by FTN Midwest Research found retailers including Wal-Mart, Sears and J.C. Penney raised prices on select items after initially discounting them when the holiday shopping season opened on Nov. 26.

Moderator’s Comment: Are bargains harder to find for consumers this holiday season as has been suggested? What is your assessment of how retailer pricing
and promotional strategies for this holiday season compare to past years?

A number of retailers, particularly department stores, looking to get out of the price wars with discounters have focused more on luxury item sales this
year, according to the Sun-Times report.

Michael Silverstein, senior vice president at Boston Consulting Group and co-author of the book, Trading Up: The New American Luxury, identified
five categories where consumers will willingly spend more for luxury items. These include products for the home, such as kitchen and bath products, cars, food, premium meats and

George Anderson – Moderator

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