Retailers use early sales to avoid discounts later

The holiday tug-of-war is under way. U.S. retailers want to rack up sales now, not later.

Consumers, however, are resisting, playing the waiting game for bigger discounts closer to Christmas.

To win the battle, many retailers are enticing shoppers with so-called limited-time sales, hoping a deadline will convince them to spend money now -- and help stores avoid profit-crunching price cuts later in the season.

If these (sales) work then they don't have to get that promotional as we get near Christmas, said Marie Driscoll, a retail analyst with Standard & Poor's equity research.

Early deals may give retailers the chance to sell their merchandise at 20 percent to 30 percent off, instead of the steeper 50 percent to 60 percent off sales seen closer to Christmas.

If they drive traffic and they can move their inventory and have Christmas at all just 25 percent off, that's not a bad thing, she said.

DOOR-BUSTER DOUBLE TAKES

While eye-popping door-buster discounts have come to be associated with the long Thanksgiving weekend, which kicks off the holiday shopping frenzy, retailers are using them this year well into December.

Last weekend, Toys R Us held door-buster sales Friday night and Saturday morning, selling Mattel Inc's Barbie fashion dolls for 30 percent off and Hasbro Inc's Mr Potato Head at 40 percent off.

J.C. Penney Co Inc advertised a huge holiday sale, with coupons that could be used in stores on Saturday evening, while AnnTaylor's Loft brand gave 20 percent off purchases of $100 or more on Saturday.

Gap Inc's Old Navy stores are offering 20 percent off for friends and family through December 6, while Macy's sent an e-mail entitling friends and family to 10 percent to 20 percent off certain purchases from November 28 until December 3.

Retailers are luring consumers in to spend, while at the same time trying not to undermine their bottom line by cutting prices too steeply.

But with electronics expected to be popular again this year, clothing retailers in particular are looking to stand out in the crowd and attract shoppers' limited dollars.

The coupons will help get more people in the doors sooner to try to get a forecast as to how they're doing, and to also try to assess do they need to offer more coupons or potentially cut prices even more? said Linda Shea, global managing director of customer strategies at Opinion Research Corp.

DELICATE DANCE

The promotional dance is a difficult one to perfect, especially this year when holiday sales are projected to rise at the slowest pace in five years, according to the National Retail Federation.

Retailers are vying to win sales from shoppers who are being squeezed by the rising prices of food and fuel, the slowing housing market and fallout from the credit crunch.

Meanwhile, there are 32 days from Thanksgiving to Christmas day, giving retailers the task of trying to fill the many shopping opportunities between Black Friday and Christmas with events that keep consumers excited.

I don't think that the games have truly begun yet, said Patricia Edwards, a fund manager at Wentworth, Hauser and Violich. I think there's a lot of stuff in (retailer's) back pockets that hasn't yet been pulled out.

Wal-Mart Stores Inc is holding multiple limited-time deals to try to get shoppers to visit more frequently, and buy more than just the discounted item.

Our hope is that they're actually going through the other parts of our store as well, a Wal-Mart spokeswoman said.

Many retailers, planning for a cautious holiday shopper, cut back on inventory, which may help them avoid deep discounts as Christmas nears. Last-minute shoppers may find the pickings are slim, analysts said.

Yet many consumers have indicated they are holding out.

According to a survey released on Sunday by America's Research Group, 60 percent of respondents said they have shopped for gifts since the Thanksgiving weekend, but 54 percent of those who had not, said they were awaiting big, money-saving deals just before Christmas.

Retailers may be forced to unveil those rock-bottom discounts if this early push does not generate the type of sales they were expecting.

(Editing by Maureen Bavdek)