Retailers are priming for a consumer comeback.
Shoppers have started to show they're willing and able to spend more, and stores are tweaking their merchandise to accommodate them. Cashmere is making a comeback and sellers of everything from wine to toys are seeing shoppers move away from the very lowest price ranges.
The moves signal optimism that the recovery from the Great Recession is picking up steam, but there's a downside for shoppers: the return of higher prices.
The changes, which have started to crop up this spring, range from bringing back lavish cookware sets that were dumped during the Great Recession to once again stocking big wedges of gourmet cheese instead of cutting them into smaller chunks that cost less.
Toys R Us, which carved out a section in the store to sell toys under $3 during the downturn, is now throwing in $5 toys. Home-improvement chain Lowe's Cos. has tweaked its spring advertising to focus less on low prices and more on the experience of its salespeople.
Meanwhile, HSN Inc. is back to showcasing $250 Wolfgang Puck cookware sets and pushing more gold jewelry instead of silver.
On the high end, luxury stores are prominently displaying $1,500 python skin shoes instead of the $700 patent leather highlighted during the recession, said Robert Burke, a New York-based luxury consultant.
The steps are moderate because retail decision-makers emphasize they still think consumers will keep many frugal habits amid high unemployment. But stores don't want to get caught flat-footed in the recovery, either.
Last week's batch of first-quarter earnings reports from Macy's Inc., Nordstrom Inc., J.C. Penney and Kohl's Corp. all showed consumers' willingness to spend more on a variety of items, but spending is still well below what it was before the Great Recession and shoppers remain pragmatic.
"Retailers are testing the waters with more aspirational items and prices to gauge consumer appetites —and there is some early evidence that consumers are responding well," said John Long, retail strategist at Kurt Salmon Associates. But he pointed out that stores, including luxury merchants, are sprinkling in higher-priced items while continuing to expand store-label offerings, which are less expensive.
For 18 months, stores cut prices and slashed inventory as nervous shoppers focused on bare necessities. But since January, consumers have been more willing to spend on nonessentials such as denim leggings, and more people are willing to pay full price.
Coach Inc., whose handbag prices are now 12 percent lower than a year ago, told investors last month it might raise prices this year as sales of purses priced above $300 recover. However, Coach CEO Lew Frankfort told The Associated Press that its typical shopper is still "not spending at levels she did in 2007, at least not yet."
Stew Leonard Jr., president and CEO of New York and Connecticut grocery chain Stew Leonard, said that he could "feel things pop around Easter." Customers are tentatively spending more, gravitating toward $30 wine bottles instead of $10 to $15 wines, but not the $50 versions yet, Leonard said.
That's why he's making small adjustments. Among them: Stocking and packaging big wedges of Reggiano Parmesan cheese, which sells for $13.95 per pound. Leonard noted that in late 2008, customers had sticker shock and no longer wanted to pay more than $10 for a block, so the store started to cut wedges smaller to shrink the price to about $9.
In recent weeks, Mohan's Custom Tailors began restocking its shelves with the most luxurious fabrics like cashmere as well as the highest-grade materials from designers Ermenegildo Zegna and Loro Piana, which also create their own fabric as well.
The New York shop turned to ordering fabrics mostly from generic mills when clients, who include investment bankers and hedge-fund managers, were no longer willing to shell out $1,200 or more for a suit, and were sticking to $700 price tags, according to K.J. Singh, sales manager.
But since late February, Singh has seen an increase in customers willing to splurge after Wall Street bonuses made a comeback.
"We're feeling OK," said Singh. "But it's still too early."
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