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Can retailers survive clearance fever?

September 12, 2009

ST. LOUIS — Boutiques know that they can attract more shoppers with sales than regular prices, but if they want to stay in business they have to wean customers off fantastic 40, 60 and even 90 percent off deals.

When prices go that low, they are dipping into or below the wholesale price that the shop paid for the item; that means they are losing money with each receipt.

"Sales are a necessary evil for most retailers right now," said Courtney Cothren , who coordinates the fashion marketing and management program at Stephens College in Columbia, Mo. "Once the economy bounces back, I believe consumers will still shop in this mind-set, and it will be very difficult for retailers ... to revert back to selling at regular price."

But clearance prices are a risk retailers have to take in order to get out of this downward spiral.

"I'm not worried that people are in a sale state of mind when they shop," said Hillary Dutcher of Ivy Hill boutique in St. Louis . "What's on sale is the stuff that we won't have again, so if you don't buy it at regular price and it doesn't make it to the sale rack, you're out of luck."

She said that people who see something they like will pay a reasonable price for it, even if it's not on sale. Boutiques, however, are learning that the economy has set a lower standard on "reasonable."

Every boutique we've talked to in recent months has mentioned that they have lowered their store price points. In some cases that means stocking different items with lower wholesale prices or often playing hardball with distributors to get them to cut their profit margins, too.

Where boutiques thrive is offering unique, specialized selections.

But every retailer has to work with items that for whatever reason, just don't sell. Clearance and sale racks were standard fixtures even before the economy took a turn for the worse. Now, however, those sections are bigger because common wisdom says that consumers are going to have to spend themselves out of this financial state.

That means buying new things. Shop owners believe that in order to entice people to purchase new things they have to clear out stagnant items that have been cluttering back rooms and sales floors.

"When you're sitting on inventory that doesn't sell, you're sitting on money," said Natalie Woods of Daisy Clover in Webster Groves. Mo.

And every other shop owner echoed her sentiments. Carla Felumb of Mister Guy Ladies Store in Ladue, Mo. , said that in most instances things will sell eventually, but the wait isn't worth it.

Felumb said that successful boutique owners have to view sales as learning experiences. They learn about what doesn't sell, make adjustments and move on.

Woods noted that, "Just because something is on sale doesn't mean that it's not good stuff." It just means that it wasn't the right stuff at the right time for their store.

"Some items are still hanging around because it wasn't the right size for the person who wanted to buy it," Woods said.

Boutiques tend to offer a certain exclusivity; they only offer limited size ranges, meaning they might only have one item in each size or at most two. When the item dwindles in number, it's just harder to sell one of something (shoppers are funny that way).

But Woods noted that she's a proud size large, and said that too many people are under the assumption that boutique shopping is for the skinny. Many stores have full size ranges, but even at her store she notices that larges and extra smalls migrate over to the clearance rack more often than smalls and mediums, but she's committed to offering something for diverse sizes.

Now's not the time to exclude any more shoppers.

 



McClatchy Tribune Information Services