Some may occasionally sell product at full retail, but it is becoming increasingly rare for merchants, especially those in apparel, to turn inventory without discounting it first.
Madison Riley, a retail strategist at Kurt Salmon Associates, told USA Today, "There's no question we (consumers) are programmed to search and hunt for bargains" and "the competitive dynamics are so high, you (retailers) have to do all you can to minimize markdowns."
The number and frequency of markdowns has had a serious negative effect, according to Christine Chen, a retail analyst with Pacific Growth Equities.
"Department stores would do the markdowns to draw people into stores, but now it feels like they're always having a one-day sale ... and it doesn't even feel special anymore," she said. The discounting does "create traffic, but it trains the customer to expect the sale and not want to pay full price."
Retailers are looking to increase the percentage of total sales sold at full margins with a number of different tactics, including reducing product quantities, starting out with more affordable pricing and reducing the number of sales promotions.
A number of retailers are tightening up orders of products to reduce the need for markdowns to move merchandise out. Ms. Chen pointed to Gap as one retailer "planning its inventories a lot leaner" to avoid having to deal with this situation.
Retail analyst Dana Telsey of the Telsey Advisory Group said inventory management systems have helped in this regard so that items aren't out on the rack for "eight to 10 weeks."
Perceived product quality, said Ms. Telsey, is the establishing factor for a fair market price for goods.
"The more full-price items a store has, the more profitable it can be," she said. "And guess what? It means shoppers like what they see because they'll pay full price."
Other department stores are moving to an EDLP strategy rather than sticking with the traditional high/low pricing used in the sector. Terry Lundgren, CEO of Federated Department Stores, the parent of Macy's and Bloomingdale's, said of that company's EDLP pricing strategy, "What we're doing is getting down to the sale price. You don't have to wait for it to go on sale."
Mr. Lundgren said his company has not totally moved away from sales because consumers would revolt. Instead, he told USA Today, the company has focused on running fewer but more special markdown events.
Abercrombie & Fitch is another among the chains who are looking to limit markdowns. According to Ms. Chen, A&F now runs sales at the end of each quarter to help retrain customers away from expecting the sale du jour. "The customers know if they want something, they're not going to be able to get it that season at a discount," she said.
Discussion Questions: Are consumers as price sensitive as most retailers (aside from those in the luxury good sector) believe them to be? What do you see as the most effective means of retraining customers to pay full retail for goods? Is there a retailer(s) that you believe has done a solid job in this reprogramming effort?