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Retailers entice shoppers to spend rebates

/ Source: The Associated Press

Retailers from Safeway to RadioShack Corp. are offering special discounts to lure consumers in and persuade them to spend some or all of their economic stimulus checks, the first wave of which were deposited into bank accounts this past week.

"It's going to be a real war in the stores starting this weekend" as retailers fight to get a piece of the checks, said Burt P. Flickinger III, managing director of Strategic Research Group, a consumer industry consulting firm.

The retailers are all hoping to persuade Americans, worn out by high gas and food prices and the weak housing market, to spend the money rather than save it or pay down debt. Polls have indicated that most recipients plan to use the rebates mainly to buy gas, food and other essentials that have become far more expensive in the past year if they spend the money at all.

That makes convincing shoppers to buy a new dress, flat-screen TV or living room sofa a much harder sell.

"I think the retailer recognizes that they've got to strike while the check is hot," said Marshal Cohen, chief retail analyst at research firm NPD Group. "I think if you're a retailer and you're not trying to entice the consumer, you might as well go back to bed."

The checks and payments are part of a $168 billion tax rebate plan passed by Congress to help spur the lagging economy. Under the plan, individuals who have filed their tax returns for the year can receive up to $600 and families can get up to $1,200, plus $300 per child. The rebates are expected to reach 130 million households. The direct deposit payments began on Monday and paper checks go out May 9.

Stores offer big bargains
With sales declining, some clothing and specialty retailers have been cutting prices for months. But this week, a few big names stepped up their efforts to try to turn the stimulus cash into extra sales. Wal-Mart Stores Inc., for example, announced price cuts on everything from cereal to shampoo on Tuesday to coincide with the first round of payments.

"The traffic is certainly busier these days in our stores," said Wal-Mart spokeswoman Melissa O'Brien, although she couldn't be certain the most recent price cuts were the source of the traffic increase. She declined to say whether sales had grown since Monday or whether the marked-down items saw significant gains in the past week.

Other retailers are waiting until the weekend to offer their best deals, since more shoppers will be out on their days off.

CVS Caremark Corp., for example, is offering its loyalty card customers $5 off on a $30 purchase. At Restoration Hardware, shoppers will get $100 off orders of $750 or more through Sunday. Circuit City Stores Inc. is offering an extra 15 percent off through Saturday.

Flickinger said merchants are already offering weekly promotions or sales timed to events like Mother's Day, but the weekend's sales are meant as an additional incentive to "get consumers who are getting the money to spend it right away in their stores."

He said competition may be most heated at grocery stores where food prices have skyrocketed in recent months due to higher commodity costs. Milk, for example, has jumped to over $4 a gallon.

Gift card bonuses
Grocers including Supervalu Inc. and Kroger Co. are offering a 10 percent bonus when shoppers use their rebates to buy gift cards. For example, if a customer turns a $600 economic stimulus check into a gift card, the cards would be worth $660.

Safeway Inc. has announced its own plan to give a 10 percent discount on groceries to Club Card customers who cash their paper checks at the store. That program begins May 14.

Sears Holdings Corp. also is offering a 10 percent bonus to anyone who converts their check into a Sears or Kmart gift card. That deal also starts May 14.

Other retailers are mailing special discounts to their most loyal customers. Lowe's Cos. mailed an offer Wednesday to its most active shoppers offering $10 off their next $50 purchase or $25 off their next $200 purchase when they turn their checks into its "project starter" cards.

Whether this weekend's sales can convince spend-wary consumers to come back to stores is far from certain.

Bryan Kennedy, a 30-year-old resident of St. Paul, Minn., received his payment in his bank account Wednesday and plans to spend part of it on a new set of wheels for his bike. But, he said, the bulk of his check will go toward paying down credit card debt: "I'm going to try to use it responsibly."