RECESSIONARY RETAIL

Report: Discounting Damages Brands…according to Brandweek (duh):

The Dollars & Consumer Sense 2009 study, released today, finds that consumers often have a negative reaction when they see the price slashed for their favorite product or service.

In fact, 70 percent of respondents to the Yankelovich poll said such cuts probably mean the brand was overpriced in the first place. And, 62 percent said they assumed that the product was old and they were just trying to get rid of it.

"People are suspicious if you significantly discount your brand,” said J. Walker Smith, president of Yankelovich Monitor and executive vice chairman of The Futures Company. “If you make significant changes in your value proposition it can confuse them. You have to give them reasons to buy stuff as opposed to just lowering prices as a knee jerk reaction to the economy.”

Earlier this year Saks Fifth Avenue announced it was retreating from a discounting strategy after it lost nearly $100 million in Q4. CEO Stephen Sadove said the chain would add a mix of lower priced items instead. The assumption became "they are just overpriced all year long," said Smith.

Brands that do not discount achieve a positive halo among many consumers, per the study, which polled 1,0002 consumers in January. Sixty-four percent of those polled said they assume the product is either extremely popular or a good value if they maintain their price.

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And then there's this story, from the WSJ:

Consumers are now challenging high prices after seeing designer clothes marked down by as much as 75% in recent months….Addressing fears of continued discounting, Neiman Chief Executive Burton Tansky told investors Wednesday, "Full-price selling is what we are concerning ourselves with."

The six-year boom in luxury goods came to a screeching halt last fall, as wealthy shoppers dramatically cut back on their purchases of designer clothing and other pricey items. Consultant Bain & Co. last month forecast global luxury consumption this year would drop 15% from 2008.

To avoid directly discounting merchandise, Neiman has resorted to some marketing tricks. Last week, for instance, it offered a $500 gift card for those who donated "gently worn" suits to charity. It also sent some regular customers a $50 "perk" card to use toward alterations.

Coaxing consumers back into the habit of paying full price is a crucial challenge for the luxury goods business. On Wednesday, Dallas-based Neiman posted a $509.2 million fiscal second-quarter loss. It took largecharges to the value of its stores and trade names, reflecting impairments linked to the recession. It was the first holiday-period loss since Neiman began disclosing quarterly results in 1994.

The company said sales for the quarter ended Jan. 31 declined 21% from a year ago, the second consecutive quarterly decline. It earned $44.3 million on sales of $1.37 billion a year ago.

"We have to get the customer to buy [at] full-price," said Ms. Goldberger, Neiman's vice president and divisional merchandise manager for women's designer sportswear. "If you offer the value up front, you won't get this discounting nonsense."

But then there's this.

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