Retail: The Great Holiday Blowout Sale

From Neiman Marcus to Old Navy, no one's immune to big sales promotions leading up to what promises to be the weakest holiday season in decades

By Jane Porter

This holiday season is shaping up to be the battle of the better deal—and it's a bloody battle indeed. For months, retailers have been throwing themselves at consumers with promotions, yet October results show such efforts aren't yielding much, with same-store sales coming out negative across retail sectors. Less than three weeks away from Black Friday—the biggest U.S. shopping day of the year—retailers are bracing themselves for what promises to be the weakest holiday season in decades.

It's a fear that's turning what once were high-end department stores into outlet-style versions of themselves and mass-market retailers into dollar stores. At Saks Fifth Avenue (SKS), where same-store sales plummeted 16.6% last month, a $1,030 pair of Christian Louboutin boots can be purchased for $618. At Old Navy (GPS), where sales at stores open more than a year were down 20% last month, winter gloves and scarves were $1 apiece last weekend. "I have never seen any environment like this," says retail analyst Jennifer Black, who has followed the industry for nearly 30 years. "The fight is on.… They are all scared."

Department stores were hardest hit last month, with an average 12.8% decline in same-store sales. As a result, retailers like J.C. Penney (JCP) and Nordstrom (JWN) are doing anything they can to one-up their competitors for consumers' attention. And they have no shame. At Penney's, where same-store sales fell 13%, "The Biggest Sale of Them All" has items marked as much as 60% off. At Neiman Marcus, where same-store sales plunged nearly 27% last month, a promotion called "First Call Sale" has new items that typically don't go on sale right away marked down as much as 40% the moment they hit shelves.

Angling for Word-of-Mouth

Nordstrom, where same-store sales were down 15.7% this October, is using its price-matching strategy to compete with others vying for shoppers—following suit on sales at Saks and Neiman by honoring their discounted prices. And while Nordstrom typically offers double-rewards points for five-day periods during sales, this year the double-points perk that gets customers a $20 coupon for spending $500 is lasting 69 days, until yearend. The hope is that customers will amass points and return for more. Seattle-based Nordstrom is also relying heavily on its regular customers to mitigate weak sales next month, looking to perks like a free concierge that can pick out, wrap, and ship gifts for free to entice consumers. "It's not new, but now it's more important than ever," says Nordstrom spokeswoman Brooke White. "If we can take care of one customer and they tell a friend…that's in large part more valuable than throwing money to marketing activities."