Stores adjust to thriftier consumers

NEW YORK (AP) — The Great Recession and Americans’ retreat into thriftiness are teaching retailers a new lesson: How to survive when consumers are focused on “needs” rather than “wants.”

For years, shoppers splurged on everything from $5 lattes to $200 jeans, and retailers responded by opening more stores and offering more choices. Now, beset by high unemployment and limited access to credit, shoppers are limiting most of their purchases only to essentials or the best deals.

Retailers’ first response to the sudden and sharp pullback in spending last fall was to offer deep discounts and more coupons to keep merchandise moving. But to survive over the long haul, the watchword for stores and product-makers is “small.”

They’re stocking shelves with slimmed-down milk jugs and half-sized pies. They’re charging less for stripped-down products such as blouses with less-frilly designs and detergents with less powerful cleaning action. Brands are disappearing, too, including Kraft’s Handi-Snacks pudding. Some stores are being reduced in size, if they’re not shut down entirely.

The changes are likely to last for years. Consumers today are beset by job losses and limited access to credit. Even when the economy improves, it will take years before the debts that piled up during the decade-long shopping spree are paid off. Americans also are getting used to their newly adopted frugal habits of saving more and spending less.

“I don’t think we are going to go back to business as usual,” said Steve Sadove, chairman and CEO of Saks Inc., operator of Saks Fifth Avenue.

As companies woo buyers, shoppers are finding they’re in control. And they’re driving hard bargains.

Renee Bello, a real-estate broker in Sandwich, Mass., is enjoying the bombardment of store coupons, more lower-priced products and better quality in store-label merchandise, particularly at grocery chains.

“I definitely feel I have power,” says Bello, 54, who has been able to grab coveted brands and high-quality groceries even though she’s cut her spending in half because of economic uncertainty.

For retailers, the changes need not be devastating. In fact, those that survive will be leaner and more efficient.

“There’s nothing like a good, old-fashioned recession to make you run a better business,” J. Crew Group Chairman and CEO Millard Drexler said recently.

To stay in business, stores find they can’t take big chances with what they put on the shelves and how much they stock of each item.

Merchants now are keeping less stock on hand and delivering goods into the store more frequently to keep stores looking fresh instead of having items sitting on the shelves for months. Retail executives hope that strategy will help cut down on aggressive discounting.

The long-term goal is for merchants to carry 11‚Ñ2 months’ worth of inventory, compared with 31‚Ñ2 months in the past, says retail consultant Burt P. Flickinger III.

Apparel companies are focusing on the most popular colors instead of oddball hues. For example, Nicole Miller eliminated olive green in its prom-dress collection. And plain styles were prevalent at last week’s apparel-industry trade show in Las Vegas, says David Wolfe, creative director of The Doneger Group, which advises stores on apparel buying.

Shoppers won’t buy tops or dresses with seasonal designs because they want to wear the clothes year-round, he says.

Manufacturers and retailers that held firm on pricing a year ago to try to protect their brands have felt the sting.

Consumer products giant Procter & Gamble Co., whose revenue fell 11 percent in the latest quarter as it remained steadfast on pricing for its powerhouse brands, is experimenting with price cuts. In a departure from the company’s carefully cultivated premium image, P&G is even testing a lower-cost version of its signature Tide laundry detergent. Tide Basic sells for about 20 percent less than the regular powder form and lacks the latest cleaning ingredients.

Abercrombie & Fitch, long known as the go-to store for pricey teen fashion, was hammered by revenue declines of nearly 30 percent when it refused to budge on prices. It relented this summer.