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Bargain hunting continues even as economy improves

WASHINGTON — The jobless rate is at a six-year low, gas prices have dipped below $3 a gallon, and consumers are more upbeat about the economy.

These are the kind of economic conditions that should encourage consumers to loosen their purse strings this holiday season — and indeed, surveys show that shoppers plan to spend more this year on gifts and decor.

But consumers are stubbornly clinging to one recession-era shopping behavior that has retailers scrambling: discount prices.

“The retail industry has created this monster that they wish they hadn’t,” said Jennifer Black, president of retail research firm Jennifer Black & Associates.

Retailers say they are girding for a fierce competition over who can offer the best prices this holiday season, and many have already kicked off their deals. Wal-Mart lowered prices on 20,000 items on Nov. 1 and expects the majority of those cuts to remain in place through the holiday season. Amazon.com, Staples and several other retailers have made their Thanksgiving weekend deals available to shoppers.

Hunting for rock-bottom prices has long been a Black Friday tradition, but experts say the emphasis on promotional pricing rose to new heights during the recession. Retailers aggressively slashed prices throughout the holiday season when they found merchandise wasn’t moving. That practice continued even after the holidays as the recession dragged on, and customers became trained to look for deep discounts such as “40 percent off your entire purchase.”

Experts say the lingering promotion-mania may be related to one of the key weaknesses of this economic recovery: Wages have largely remained stagnant, meaning plenty of households likely aren’t feeling more flush than they were several years ago.

Non-economic factors, too, are fueling the promotion addiction. The Internet has created unprecedented transparency around price, and smartphones have made it easier for shoppers to make sure they’re not missing out on a better deal. In a survey released by Deloitte in October, 68 percent of shoppers said they were likely or very likely to research a purchase online before ultimately making it at a store. Twenty-three percent of shoppers said they would use their phones to do in-store price comparisons.

Retailers say they are struggling to cater to customers’ desire for deep discounts without destroying their already-thin profit margins.

“It becomes a limbo contest: How low can you go? At some point you’ve got to fold the hand,” said Charlie O’Shea, a retail analyst at Moody’s Investor Service.

As the recession gets further in the rear-view mirror, Jesse Tron, spokesman for the International Council of Shopping Centers, said his organization has noticed a new twist on deal-hunting. In some cases, shoppers are once again shelling out for pricier items, such as upscale denim or luxury handbags, suggesting that they have a comfortable shopping budget. But even as they do so, they’re still opening their wallets only when the items are priced promotionally.

“No one wants to feel like a chump,” said Alison Paul, leader of Deloitte’s U.S. retail practice.


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