Begging for customers

Businesses grow increasingly inventive and aggressive in wooing reluctant spenders

January 09, 2009|By Andrea K. Walker | Andrea K. Walker,

Free antibiotics. Cheap steak dinners at luxury restaurants. Heavy markdowns on clothes and furniture. The option to return a new car if you lose your job. Discounted tickets to the symphony.

As the country's recession has pushed consumers to curb their spending, companies are offering some radical promotions to snare their business. Industry experts predict that companies will have to continue their aggressive discount strategies to survive after more dismal reports yesterday from the nation's retailers showed that consumers kept pulling back on spending during the holiday shopping season.

Restaurants such as Ruth's Chris Steak House and the Cheesecake Factory have created "economy-proof" or cheaper menus. Grocery stores such as Giant Food and Wegmans Food Markets Inc. have lowered their prices, including on some antibiotics that won't cost consumers anything at all. Hyundai, well aware that many Americans are too worried about losing their jobs to buy a car, vows to take back a vehicle from anyone who finds himself in the unemployment line. And several arts organizations are offering discounts to recently furloughed state workers.

This past holiday season saw some of the steepest markdowns in years at department stores, discounters and other retailers trying to lure in shoppers. But more companies seem to be upping the ante, as the country dives deeper into a recession and consumers remain scared to spend.

"Everybody is rushing to bring out a dollar menu, $4 menu or some other big promotion," said Roland Rust, chairman of the marketing department at the Robert H. Smith School of Business at the University of Maryland. "They're trying to have some kind of stopgap approach that will keep them customers during this rough period of time."

Retailers said yesterday that the critical holiday season was the worst since at least 1969, with the International Council of Shopping Centers reporting that sales in November and December dropped 2.2 percent from a year ago. Even Wal-Mart, which had seemed to be immune to market conditions, did worse than expected.

The climate has forced many stores out of business, and retail experts expect a wave of closings in coming weeks. Macy's said yesterday that it will close 11 stores, though none in Maryland. Women's apparel chain New York & Co. said it would close up to 50 stores during the next five years, but it didn't disclose where.

In Maryland, Champion Billiards & Bar Stools and furniture store National Wholesale Liquidators are closing stores. Columbia-based Mammoth Golf is liquidating its store.

"When the economy gets rough, golf becomes a luxury item," said Chris Thompson, the golf store's former president.

Pikesville-based Big Steaks Management, which operates several restaurants in the area including Babalu Grill, Blue Sea Grill and various Ruth's Chris Steak House locations, began looking at ways to cut costs after seeing a slowdown in business last year.

At its high-end Ruth's Chris locations, the company cut the cost of menu items by $1 - the first price cut in five or six years - and began offering a lower-priced bar menu for the first time.

It added a $39.95 stuffed lobster and steak entree late last year. A similar dish would normally cost more than $60. The restaurant company also said a meal with a salad and a side dish it began selling for $35.95 has become more popular as diners cut back. A steak alone cost that much in the past.

"People are much tighter with their money," said David Sadeghi, Big Steaks' chief operating officer. "They're looking to get the most out of it. And that's how they're deciding where they'll spend."

The Cheesecake Factory created a separate "special menu" last month with new items such as tomato basil pasta and chicken pot pie priced at $11.95 to $14.95. Nearly half the restaurant's regular menu already has items in that price range.

"We do know that people have less money to spend to dine out," said Mark A. Mears, senior vice president and chief marketing officer for the Cheesecake Factory.

The restaurant industry has been hit particularly hard by the recession because dining out is such a discretionary expense.

Restaurant owners reported the sixth consecutive month of negative same-store sales results in November, the latest numbers available, according to the National Restaurant Association. About 66 percent of operators reported a decline, the association said.

"You'll see a lot of restaurants are offering special values or different promotions just to drive traffic," said Maureen Ryan, an association spokeswoman.

Grocery stores also are battling it out for consumer dollars. Even as people eat at home more often, it doesn't necessarily mean they're spending extra on groceries. Many are trading down to less expensive private label products and lower-priced cuts of meat. Some grocers are cutting prices on various items. One way Giant and Wegmans are trying to appeal to penny-pinching consumers is by offering certain antibiotics free of charge.

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