Retailers Wonder When Shoppers Will Return

New York, NY, Jan. 20, 2009--Retailers are concerned that consumers who quit buying late last year may not return to stores for a long time.

For years, retailers could afford to be sloppy about running their businesses because customers kept buying.

Stung by the worry that shoppers -- who cut spending by the most dramatic amount in at least 39 years this the holiday season -- may not start spending again for a long time, stores are making drastic changes. They are cutting out marginal suppliers, hiring outside experts to keep inventory lean, holding special events for those who are still buying and making extraordinary efforts to gauge customer satisfaction.

Pricing goods within reach of strapped consumers is also a big focus, given the way nervous consumers have stopped shopping. Same-store sales, or sales at stores opened at least a year, fell 2.3 percent in November and December together, according to the International Council of Shopping Centers.

Chief executives from Crate & Barrel to J.C. Penney acknowledged during the National Retail Federation meeting this month that they're navigating new territory, predicting that the fundamental shift by consumers to spend less and save more will linger.

The biggest unknown is when or if shoppers will ever resume spending the way they did when the housing market was booming, credit was easy and jobs were more plentiful.

"Customers wanted and wanted and wanted some more and we sold and sold and sold some more," said Burton M. Tansky, president and CEO of The Neiman Marcus Group. Now, "frugality is more important."

For the last two years, many of the best-run nation's stores like J.C. Penney Co. had been reducing inventories in response to the consumer spending slowdown. But no one anticipated the severe retrenchment that hit in September as the financial meltdown ravaged shoppers' retirement accounts, reduced credit availability and resulted in massive layoffs across industries.

As shoppers simply stopped buying, stores were forced to discount as much as 75 percent off in some cases even before the official start of the holidays -- resulting in the weakest season since at least 1969, when the ICSC index began.