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Shoppers have come to expect significant discounts these days as retailers struggle to attract customers in a sluggish economy. And while customers can count on big promotions this holiday season, there might be less merchandise to choose from.

The reason: Many retailers are reducing their inventories to avoid the staggering markdowns they were forced to make last year when shoppers cut back on purchases. Retailers are hurting from reduced sales so far this year, and those big discounts will further slam their margins and profitability.

"Everybody is on the same page. It will be a difficult holiday for retailers. And it won’t be good for consumers, either," said Erin Armendinger, managing director of the Jay H. Baker Retailing Initiative at the Wharton School of the University of Pennsylvania. "Smart retailers are trying to control their inventory so there won’t be massive markdowns."

Shoppers would be wise to buy items when they first see them, Armendinger said, because that merchandise might not be around if they wait for deeper discounts.

Armendinger’s advice follows disappointing back-to-school sales figures, a bad omen for holiday shopping. August retail sales fell 0.3 percent, following a drop of 0.5 percent in July, the Commerce Department said Friday. Excluding cars, purchases were down 0.7 percent, the most this year. The figures showed a drop of 1.5 percent in purchases at department stores, the biggest decline since April 2007.

The Commerce Department also said business inventories rose in July at the sharpest rate in four years, another sign that consumers are reluctant to spend.

Meanwhile, the International Council of Shopping Centers predicts that back-to-school purchases made from July through September — the biggest retailing season after Christmas — may climb only 1 percent, to $38.5 billion. That would be the slowest growth since 2001.

"Back-to-school was a total bust," said Armendinger.

Although Wal-Mart Stores Inc.’s August sales exceeded expectations, many other retailers, including midpriced merchants, saw declines in same-store sales. Kohl’s Corp., for example, reported August same-store sales fell 5.8 percent, and J.C. Penney Co. said they fell 4.9 percent.

In a statement, Penney said, "The company continues to expect that total inventory will be below last year’s level at the end of the back-to-school shopping season."

Although retailers already had been reducing inventory ahead of the back-to-school season, they still had to mark down merchandise, experts said.

Discounts were 10 percent deeper at mall-based apparel stores than a year ago, despite a drop of 10 percent to 15 percent in inventories, according to Dan Hess, founder and chief executive of the New York research firm Merchant Forecast.

That means consumers can expect to see less merchandise for the holiday season, said Tom Krause, director of strategic consulting for Fenton-based Maritz Research’s retail group.

"Last year retailers got burned with excessive inventory," Krause said cash til payday loan. "They know they will lose customers if they don’t have the selection, but retailers say it’s better than getting stuck with inventory."

However, Scott Krugman, a spokesman for the Washington-based National Retail Federation, said retailers are doing a good job of managing inventories. He didn’t anticipate any merchandise shortages.

"Reductions in inventories will affect last-minute shoppers the most," he said. "We’re conditioned to wait … most people wait, because we’re a nation of procrastinators."

Macy’s also believes there will be ample merchandise, said Ellen Fruchtman, a Macy’s spokeswoman in Atlanta. "Macy’s stores will be fully stocked, but the inventories will be managed," she said. "We’re working very hard to have an assortment that’s compelling enough that when a shopper sees just the right item, she won’t want to wait."

Macy’s Atlanta-based division oversees the St. Louis region.

A big question, according to some experts, is whether retailers can come up with merchandise that will be compelling enough to get people to open their wallets.

"There is no ‘it’ product this year. There is no ‘have-to-have,’" said Armendinger. "No one is looking for a shift in fashion. We’re past that point now, the economy is so bad."

But some retailers expect to have a good holiday season, particularly those that offer hard-to-find, sought-after items.

Among them is Jeff Glik, chief executive and president of Glik’s, the Granite City-based apparel specialty chain that has 52 stores primarily in rural and small-town locations. He said the chain expects holiday comparable-store sales to rise 1.1 percent.

The chain sticks to national brands, particularly those with limited distribution that can’t be found at retailers like Penney’s or Macy’s. Glik’s engages in very little promotional activity, so its margins are higher.

"People are staying closer to home," Glik said, "and we are reaping the benefit of that."

At the other end of the retail spectrum, Drea Ranek, one of the owners of Clayton’s upscale Lusso at 165 Carondelet Plaza, also expects strong end-of-the-year sales. The store’s unique merchandise is the key to its success, she said.

"We haven’t felt anything adverse," Ranek said about the store, which sells designer and one-of-a-kind clothing, home accessories and jewelry.

"Keeping it special is keeping us going," she said. "People are pickier about what they’re buying, but luckily, they’re still buying."

gappleson@post-dispatch.com | 314-340-8331

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