Holidays have retailers boxed in

Call it the Big Seduction.

With apprehensive consumers giving them the cold shoulder, retailers are turning on the holiday charm in ways not seen in years, hoping to lure shoppers across the threshold.

Stores are cutting prices earlier and deeper. They're offering coupon deals and financing packages. They're pushing promotions through e-mail, direct mail and loyalty programs.

So far, it hasn't worked. Consumers remain in a deep freeze, and every day seems to bring more bleak news: The Dow Jones tumbles, unemployment rises, credit tightens and home values plummet. Even people with jobs are pinching pennies.

"The frustration for retailers is that it doesn't matter if it's 60 percent off this year instead of 50 percent off last year, or even 80 percent off," said Piper Jaffray analyst Jeff Klinefelter. "The promotion just doesn't seem to be shaking the consumer from their house."

Many stores haven't been waiting for the day after Thanksgiving and the Black Friday sales bonanza that kick-starts the holiday shopping period. Last week, Marshalls advertised a why-wait-for-Black-Friday deal of 25 percent off.

Dick's Sporting Goods showcased a 60 percent off deal that ends today. Macy's rolled out at a two-day sale last week a coupon for $10 off a $25 purchase that it usually saves for Black Friday. On Thursday, Kohl's ran an online-only 15 percent off special for anything purchased between 11 a.m. and 4 p.m. Even Saks is pumping up 40 percent off sales.

Black Friday itself is shaping up to be bigger and broader than last year. Toys 'R' Us will boost the number of early morning deals by 50 percent, while J.C. Penney will add deals on 20 percent more items. At the Mall of America in Bloomington, at least a half-dozen stores are offering storewide discounts of 50 percent for the day or through the weekend.

"This is a great time to be a consumer with money," Klinefelter said. "That's the punch line. If you are employed and have some discretionary income, the sales are fantastic."

A day that can set the tone

The challenge for retailers in this annual cat-and-mouse game is to entice shoppers without cutting too deeply into profit margins, especially after months of flat or negative sales. Many merchants earn as much as 40 percent of their sales between Thanksgiving and Christmas, and retailers are well aware that a paltry showing on Black Friday could set the tone for the season.

Black Friday has been the top revenue generator since at least 2002, with sales that day representing more than 5 percent of the holiday season business, according to ShopperTrak RCT. This year, though, mall traffic is expected to be down 10 percent during the holidays, according to ShopperTrak.

About 84 percent of consumers said sales mattered more this year than they did three to five years ago, according to a survey last week by America's Research Group. But the bar is high: 42 percent of consumers said they'd be tempted only by 50-percent-off sales, while a mere quarter said they'd be inspired with a "buy one, get one free" deal, according to the poll.

Consumers are getting so programmed to seek promotions that a Supervalu executive opined that they won't even buy cereal unless it's on sale.

"People are going from one store to another just looking for sale-priced merchandise, even if it isn't what they want," said University of St. Thomas marketing Prof. David Brennan. He coauthored a report that forecasts a 12 percent drop in holiday spending in the Twin Cities, the lowest projected spending in the study's seven-year history.

The credit crunch has added another hurdle to retailers' efforts to warm up shoppers. Even consumers who don't carry a balance are seeing their credit limits lowered or their interest rates increased, as credit issuers make a preemptive strike to minimize the defaults that invariably come after holiday shopping excesses.

As a result, merchants are looking for ways around tight credit. Layaway is back in the shopping lexicon for the first time in decades. PayPal has started offering lines of credit to thousands of consumers for online holiday purchases. Retailers with their own branded credit cards are boosting rewards programs and enticements to try to open the wallets of their most loyal customers. Best Buy launched a new "Premium Silver" level to its Reward Zone program that gives customers who spend $2,500 or more a year an extended 45-day return policy and complementary Geek Squad Services.

Not enough bright spots

That won't do much to reel in such people as Dunn Bros. Coffee barista Joseph Larson. He's swimming in medical debt and is mostly opting out of holiday shopping this year. He and his girlfriend are making gifts for their family members, instead.

"The only money we'll spend will be on our niece, who just turned 10," he said.

There are some bright spots. A gallon of gas has tumbled to its cheapest price since 2005, and heating bills aren't expected to rise much this year. A Piper Jaffray report estimates those savings could free up $100 billion in potential consumer spending. But Piper and other experts don't think it'll be enough to help retailers out on a large scale. Many people will put the savings against their debt or into newly established rainy-day accounts.

With the exception of Wal-Mart, which has been the only national chain to consistently post positive sales in recent months, the holiday season for many retailers will be about surviving, not thriving.

"Those retailers that are more price-competitive, more sharp on their promotions with compelling merchandise, will suffer the least," said Bob Heupel, a Thrivent portfolio manager.

Nearly two dozen retailers have filed for bankruptcy this year, including most recently Circuit City. Steve & Barry's also has thrown in the towel, joining Linens 'n' Things and Mervyns in liquidating its stores. More bankruptcies and store closings are inevitable come January.

But an unforgiving economic climate may be the least of retailers' worries down the road. A growing sense of anticonsumerism is leading toward what Klinefelter calls a "new normal." People will want less, spend less and become more in tune with the environmental impact of their purchases.

Consumers such as Edie Opdahl are already there. A Minneapolis mother of five children ages 6 to 15, Opdahl said this Christmas won't be any more lean than previous years.

"We started paring back years ago," she said. "With five kids, you just can't afford it. But mainly, we just had too much stuff. And it felt like we weren't instilling a sense of gratitude."

Now the kids get one gift of clothing and one toy. And the family picks a charity together and makes a donation.

Jackie Crosby • 612-673-7335