Merchants will sell some wares at a loss to lure holiday buyers

Retailers are so desperate this holiday season that they're willing to lose money to get you to spend yours.

Take online jeweler Stauer. It's offering a $249 amethyst necklace for free, provided customers pay the $24.95 it costs to ship it. Stauer will lose money on the deal, but it hopes to reel in new customers who will buy other jewelry.

"In this economy, you have to be outrageous in your offers," said Stauer President Michael Bisceglia, who found that more than a third of customers who took advantage of a similar deal on a $179 pearl necklace in 2009 bought additional items. "You have to shake up the world a bit."

Not every retailer will go as far as giving away merchandise during the holidays, but many will offer profit-busting incentives to lure cost-conscious consumers. It's a critical time of year for merchants, which can make up to 40 percent of their annual revenue in November and December. And they're so worried that Americans are spooked by the weak economy, that they're willing to sacrifice profit for sales.

"Going into the holiday spending season, you'll find that's more common," said Bryan Wachter, director of government affairs for the Retail Association of Nevada.

Because Americans have been careful with their discretionary household spending, the name of the game is getting the customer in the door -- or online.

Nordstrom, for instance, is one of the first retailers to offer free shipping on most orders, no matter how small, even if it meant $3 to ship a $7 pair of socks.

With only one Nordstrom store in Southern Nevada, free shipping gives the retailer another way of reaching customers, particularly those who like the store's products but want to skip holiday crowds.

"Lots of businesses are looking for different opportunities to find customers," Wachter said.

Nordstrom is following a similar move by catalog retailer L.L. Bean, which in March dropped its minimum buy for free shipping.

"This is increasingly becoming an expectation of customers," said Colin Johnson, a Nordstrom spokesman.

Other incentives, like discounts on future purchases, can help draw consumers.

Kohl's often offers a $10 store credit for every $50 spent, while Victoria's Secret gives repeat customers discount cards for future purchases. And Sears is offering not only to match the lowest prices customers find online, but to sweeten the deal by knocking 10 percent off the difference.

"You may be making a $1 profit instead of a $3 profit, but you're not losing a sale," said Fiona Dias, chief strategy officer of members-only shopping service ShopRunner.com.

Other retailers offer interest-free financing or, like Wal-Mart Stores, have reintroduced layaway.

Furniture chain Raymour & Flanigan is allowing customers to go four years without paying interest on their purchases -- the longest period it has ever offered. Lisa King, the chain's senior vice president of marketing, declined to say how much Raymour & Flanigan will have to pay its financing company, but analysts estimate that it could pay as much as 16 percent on each purchase.

"These programs do come at a cost to all retailers that offer them," King said.

Retailers are rolling out incentives that essentially make their merchandise more affordable because they know the only way to get holiday sales is to offer the one thing that will attract shoppers these days: low prices. That's a change from better economic times when stores could lure customers with promises of higher quality products or better customer service.

The shift is happening as Americans continue to reduce their spending as they grow increasingly concerned about stubbornly high unemployment, stock market turmoil and an overall fragile U.S. economy. A recent Gallup poll found that eight of 10 Americans think the country is in a second recession.

"Retailers are now scared because some believe they're in a second recession," said C. Britt Beemer, chairman of America's Research Group, a research marketing firm in Charleston, S.C. "And the second recession is hitting them in the biggest shopping season of the year."

Despite the challenging environment, retail revenue in November and December is expected to be up about 3 percent from those months last year. Such an increase would be below last year's 5.2 percent spike over 2009, but would be above the 2.6 percent average gain over the last 10 years.

The Associated Press contributed to this report.
Contact reporter Laura Emerson at
lemerson@lvbusinesspress.com or 702-380-4588.