Retailers say promotions, lower price points necessary to lure consumers

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TORONTO - Some of Canada's major retailers say the second half of the year is shaping up to be a positive one, and those companies that focus on promotions and lower price points are well positioned to take advantage of recession-weary consumers.
Jurgen Schreiber , the president and CEO of Shoppers Drug Mart Corp. (TSX:SC), said Tuesday the drug store chain has taken advantage of its Optimum rewards program to lure price-conscious customers during the economic downturn.
"Customers love Optimum, and in a recession they love it even more," Schreiber said Tuesday at a Scotia Capital conference on consumer trends.
Shoppers has increased the number of active Optimum cardholders by two million to 9.7 million over the last two years, and 65 per cent of in-store transactions are now done using the card, he said .
Meanwhile, consumer product manufacturer Dorel Industries Inc. (TSX:DII.B) said the company's main products - which include child car seats, home furniture and bicycles - have proven resilient in the economic downturn.
"Our price points fit the times," said Dorel chief executive Martin Schwartz, speaking at the same conference as Schreiber.
The conference came as Statistics Canada reported Tuesday that Canadian consumers went into hibernation in July as the value of retail sales fell 0.6 per cent during the month, defying all expectations of a strong pick-up.
The data suggest that it may take some time before nervous Canadian consumers start gaining enough confidence to begin opening up their wallets again, a critical move needed for the economy to get a badly needed kickstart after three quarters of recession.
Economists said the weak July retail numbers may reflect weakening pent-up demand for big ticket items, the impact of continued job losses in the economy, and the fact that many retail products are selling for less because of increased competition and a drop-off in demand.
However, anecdotal evidence suggests sales may be improving.
The Forzani Group Ltd. (TSX:FGL) said Tuesday this year's back-to-school period got off to a weak start in August but the national sporting goods retailer recovered and ended up with slightly higher sales volumes than last year.
The Calgary-based company said consolidated same-store store sales increased 0.1 per cent for the seven-week period ended Sept. 20. For the first five weeks ended Sept. 8, sales were down 1.1 per cent from their year-earlier comparisons but picked up by 3.6 per cent in the final two weeks.
At Dorel, Schwartz said tight-fisted consumers are looking for bargains as they seek to stretch their hard-earned dollars in a weak economy.
"Retailers are focusing more on what we term opening- to mid-price points as shoppers of every description are gravitating to the big-box outlets," Schwartz told the conference.
"You'll see quite a variety of demographics in a Wal-Mart these days, many I'm sure who rarely ever shopped there before. We excel in these price-point categories with the majority of our sales in this area."
Similarly, Shoppers Drug Mart's Schreiber said customers are willing to spend more if they can collect points and receive rewards for their purchases.
Optimum cardholders increased the amount they spent at Shoppers by three times that of non-Optimum members between 2004 and 2009, Schreiber said.
Consumers tend to shop less during a recession, but when they do decide to shop they'll buy more, he added. To take advantage of this, Shoppers has fewer but "more impactful" promotions than it used to.
"Whenever you capture your consumer, you have to make sure they're in and they buy as much as they can," he said. "It's very simplistic, but that's the way we structure our flyer."
Shares in Forzani Group lost one cent to $12.79 in early afternoon trading on the Toronto Stock Exchange. Dorel shares lost 11 cents to $28.70 and Shoppers Drug Mart shares gained 29 cents to $43.27.

Organizations: Shoppers Drug Mart, TSX, Dorel Industries Inc. Scotia Capital Statistics Canada The Forzani Group Ltd. Wal-Mart Forzani Group Toronto Stock Exchange

Geographic location: TORONTO, Canada

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