Shoppers get even more finicky as they look for sale prices

— -- Repeated markdowns no longer cut it with price-conscious consumers, so retailers must set prices closer to what shoppers will pay right from the start, a leading industry official says.

Dan Butler, the National Retail Federation's vice president of merchandising and retail operations, says shoppers got savvier this season and asked, "Is it really worth it?" even when prices were drastically slashed.

Despite some of the deepest price-cutting ever before Christmas, MasterCard's annual SpendingPulse report showed retail sales excluding autos and gas plunged 2% to 4% for the holiday season.

"Consumers had a reawakening," Butler says, and are "voting with their dollars now."

Retailers are even more worried about the first two quarters of 2009 than the holiday season, Butler says, because that's when consumer spending slows even in a good economy. That makes pricing even more important because stores need to sell at least some spring merchandise at full price to maintain profit margins.

"By going the discount route, retailers have taught us how we should shop," says author Mary Hunt, who runs the website Debt-Proof Living (debtproofliving.com). "They've alerted shoppers to the bottom line of what they're willing to accept on prices." For now, many retailers are focusing their post-holiday promotions on home-related needs, according to a new post-holiday analysis by ShopLocal, which handles major retailers' website and newspaper promotions.

As they did during the holidays, some retailers may also continue adding less-expensive non-sale items to their shelves, says Casey Chroust, senior vice president of retail operations for the Retail Industry Leaders Association. But they walk a fine line. Retailers "don't want people to think, 'Hey, this is cheap merchandise,' " says Chroust, adding that "brand integrity" remains important.

SpendingPulse data show sales of women's clothing dropped nearly 23%, and men's apparel slipped more than 14% in November and December compared with a year ago. Sales of electronics and appliances were down almost 27%. SpendingPulse tracks total sales paid by credit card and estimates those paid with checks and cash.