Survival strategies for Macy's, Penney's, Target, Neiman's

ByABC News
February 28, 2008, 1:22 AM

— -- An economic slowdown tends to spook the retail industry. When the economy sputters, people close their wallets and delay purchases, and stores suffer. Store chains, after all, can't survive very long without robust consumer spending.

But retailers don't just stand there and take a beating. They slim down, shut stores, trim inventory, slice payroll and take other strategic steps they hope will help them endure the pain. Some stores even thrive in recession even as others struggle.

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With fears that the coming months could be the toughest for them since the 1991 recession, retailers are fighting to gain any edge they can over their rivals and to cushion themselves from the slide in customer spending. Many of them are redeploying staff and revising promotions; some are putting a new stress on low prices. In the end, they know, some of them will be winners, others losers.

"I see clients being more aggressive about promotion and reviewing the strategy by which they promote and how often they do it," says Madison Riley, a retail strategist with consulting firm Kurt Salmon Associates, whose clients include most major retailers.

The stores' strategies vary. So do their prospects for success. Much depends on how vulnerable they are in the first place.

Specialty apparel stores are struggling, too. Even though some clothing, especially for growing kids or for career women, is regarded as essential, sales figures suggest that many of those purchases are being postponed.

"The retailers accept that we're in a recession smack in the middle of it," Riley says.

Among the most visible ways that stores are trying to ease their pain from the spending slowdown:

Merchandise. Retailers must take care not to stock too little of the latest hot fashion or product or showcase it too late. Many stores, Riley says, are working more closely with overseas suppliers to settle quickly on designs and shorten the development process.

Pricing. Even retailers that try to avoid across-the-board price slashing are embracing the deep discounting trend, which Wal-Mart capitalized on so successfully last fall and holiday season.

More consumer input. Retailers can't afford to wait until the end of a season to determine which trends will prove most popular. Riley says stores are stepping up consumer research and using their websites to gather real-time opinions from shoppers.

"In this type of economy, the super shoppers get coupons out and check things online; they're going to be loyal to themselves first," says Phil Rist of the consumer insights firm BIGresearch. "Everyone's trying to find ways to make their money go as far as they can so there's something left for things they really want."