Price wars to heat up holiday

NEW YORK Fri Jun 12, 2009 12:39pm EDT

Stephen Sadove, Chief Executive Officer of Saks Incorporated, speaks at the Reuters Global Luxury Summit in New York June 9, 2009. REUTERS/Brendan McDermid

Stephen Sadove, Chief Executive Officer of Saks Incorporated, speaks at the Reuters Global Luxury Summit in New York June 9, 2009.

Credit: Reuters/Brendan McDermid

NEW YORK (Reuters) - It is a little bit early to tag a must-give gift for the 2009 holiday season, but one thing seems clear in the recession: Cheap, or at least cheaper, will be chic.

From Prada to the Palm PALM.O Pre, price will be the name of the game, as shoppers hunt down holiday gifts.

"As you look at the fall offerings, you are going to start to see products from brands ... whether it is the Pradas or the Guccis or the Diors -- you are going to be seeing entry price points that are substantially great values for the consumer," Saks Inc SKS.N Chief Executive Steve Sadove said.

With the 2009 holiday season creeping up, executives of top luxury and retail companies at the Reuters Luxury and Retail summits this week said retailers will surely have affordable gifts on shelves, while even high-end stores will carry classic brands at lower prices.

The strategy is in line with demand for a good bargain across price ranges, as job losses, tight credit access and weak home values test consumers in the recession.

"The successful retailers have really looked very carefully at their message to be sure they're communicating precisely what the customer is concerned about, why they should pick you over another alternative," J.C. Penney Co Inc (JCP.N) CEO Myron "Mike" Ullman said.

Even department stores like Penney, which already offer steady discounts, are underscoring good deals for fear of losing out on sales.

"You can trust the price being very, very competitive with anything else you'd find at comparable quality and comparable style," Ullman said.

Saks expects to sell a $950 to $1,000 Christian Dior handbag, while a different, earlier model sold for $1,500. A Prada handbag will now sell for $750 while a different one previously had takers for $1,000.

Penney, on the other hand, is expecting demand for colorful new styles, particularly in its own brands such as Decree, Worthington and Ambrielle, with lower prices being the feature that attracts shoppers.

A CRACK DEN OF ADORABLENESS

A sure way to snag shoppers was to make them feel like they walked into a "crack den of adorableness," said U.S.-based home goods designer Jonathan Adler.

Adler is expecting quirky items, similar to his $48 banana bud vase, to be a hit.

"It is the things that have a little bit of novelty, are affordable, but still feel like a luxury that one can treat oneself to and not break the bank," Adler said.

Electronics typically get a lot of attention during the holidays. Shoppers will still buy items like flat screen TVs, Apple's (AAPL.O) iPhone and the new Palm Pre if they feel the prices are right, said America's Research Group founder Britt Beemer.

Toys "R" Us CEO Jerry Storch said he expects strong sales for video games for Nintendo 7974.OS Wii, Microsoft's (MSFT.O) Xbox 360 and Sony's (6758.T) PlayStation 3. The specialty retailer sells a majority of its toys for $5 to $50 and pointed to demand for Barbie dolls and Transformers toys.

Toy companies, which get a big portion of their sales in the holiday season, are gearing up with cheaper versions of their merchandise this time.

For instance, Mattel Inc MAT.N has $30 "Elmo Tickle Hands" gloves featuring the Sesame Street character, while an Elmo Live doll sold last year for $60.

Rival Hasbro Inc HAS.N has a $28 Lil' Patter Pup, while it sold a toy dog called Biscuit for around $180 in 2008.

But some companies are in no hurry to join the flight to discounts.

No matter how much consumers ask, upscale jeweler Tiffany & Co's CEO Michael Kowalski said he is bent on not putting sales signs up in its windows. Many analysts and investors think discounting at Tiffany & Co (TIF.N) would taint the brand in the long run.

"The questions are being asked more often and the answer is the same -- the price is the price is the price," he said.

(Reporting by Aarthi Sivaraman, editing by Matthew Lewis)