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Markdown-onomics

The cold, hard truth about why the post-Christmas sales started before Christmas this year—and why stores don’t expect anyone to pay full price for anything anymore.

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The men's department at Saks, in markdown mode.  

Less than a month ago, Saks Fifth Avenue broke the unbreakable rule of retailing: It started its post-Christmas sale before Christmas. Just like that, on December 21, Saks management examined all that they had sold, and all that they still hadn’t, and, with the help of powerful software, made the snap decision to roll back prices an additional 40 percent, with Christmas a whole three shopping days away.

This was, to the retail business, somewhat akin to the domestic wiretap scandal: shocking, outrageous, desperate, an unnerving sign of troubled times; yet, on the other hand, it was kind of a yawner, prompting the question, hasn’t this been going on for years now?

Already, every retailer and his spinoff chain seem to give everyone and his uncle “friends and family” discounts; already, there are a million ways to shave an additional 10 percent off already-reduced prices. Even things that don’t appear to be marked down sometimes actually are, as I learned on a post-Christmas trip to the Roosevelt Field Mall: A pair of rhinestone-studded jeans marked $120 at Abercrombie & Fitch rang up as $39.90.

But it was the Nordstrom sales rack that began to bring me closer to the dark heart of why nearly everything seems to be on sale, nearly all the time. There, on a hanger, was a camisole, covered in leopard spots. Leopard print, I realized, is always on sale. Over in shoes, leopard-print clogs and zebra-print mules were both marked down 65 percent; in the handbag department at Bloomingdale’s, zebra-print Coach bags were 30 percent off; even at Club Libby Lu, a store targeting 5-year-olds, purple and pink leopard pajamas were 50 percent off. Year after year, in store after store, animal prints hit the sales racks first and often stay there till the clearance sales. At Saks, a pair of gauzy lilac leopard wrap dresses had been marked down three times, from $475 to $284.90 to $189.90 to $113.40, a price that was, so my friend claimed, “Cavalli-esque.” But how is this good business? How is anyone making any money?

Increasingly, that question is of secondary concern. The leopard-print shopper, retailers have decided, is more important than any of the individual items she buys. Because though the average leopard-print shopper is exceedingly price-sensitive—she’ll never pay retail—she plays an important role in the shopping economy. She can be counted on to come out every year on December 26, and probably the 28th and 29th, to sort through the clearance rack—all those glittery cropped sweaters and shearling boots that help every store beat last year’s numbers. And, more important, like the system itself, she is not entirely rational.

“You know what I’ve gotten so into that Dawn got me started on?” says one such woman, a fortysomething Leopard Lady in her chosen habitat, wearing a puffy black vest and faded jeans tucked into knee-high wedge-heeled boots. Instinctively she shuffles through the animal-print aisle, piling her gold-flecked left arm with stuff. “Those collapsible hangers they sell on HSN, I tell ya; before, my closets were so full I couldn’t go shopping,” she continues, referencing, for the uninitiated, the Home Shopping Network.

“Now, I’m like, I can shop again!

And that is the point: This shopper can be counted on to buy stuff few others will. Leopard skin is just the bait.

There was an era in which a red 30 percent off sign meant something simple: The supply of a given item surpassed demand at the full price, and the equilibrium needed to be corrected. Maybe the floor needed to be cleared to make room for new shipments, or maybe a blizzard had kept folks away for too many critical shopping days. Either way, a retailer’s mistake had become a consumer’s lucky break. The more desperate the retailer, the bigger the opportunity. Because in the days before computers—and markdown-optimization software—retailers didn’t always know what exactly they had on hand, or what precisely wasn’t selling. So when stuff needed to go, out came the red tags.

Then there was another type of sale: the sale meant to stimulate sales, in which a store advertises a certain segment of goods at a deep enough discount to lure more shoppers through the doors. This type of sale is usually planned, and it is the reason Wal-Mart discounts Barbies and DVD players below wholesale prices during the holidays and why all the big bookstore chains mark down the New York Times’ best-seller list by 30 percent, even though you’d think these high-demand books would be able to command full price.

Interestingly, the sale to stimulate sales was pioneered with largely philanthropic intentions. In 1877, department-store baron John Wanamaker realized the textile mills and factories from which he bought much of his merchandise were out of commission in December, making for a meager Christmas for many working-class families. At the same time, he knew he would have to cut back on his own employees’ hours after the holiday season. So he placed a huge order of bed linens for delivery in January and agreed to advertise them for sale at cost in something called a “white sale” in 1878. This kept people employed and gave shoppers a theretofore-missing reason to buy stuff in January. It performed so well that an annual tradition was born.


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