Frugal customers are becoming an ominous threat to Macy's

The days of full-priced department store merchandise might be over.

Macy’s same-store sales declined 2.6% in the second quarter, and the company blames consumers who are increasingly hesitant to pay for brand name clothing and handbags.

While sales at off-priced retailers like T.J. Maxx are soaring, traditional department stores are being forced to discount. Macy’s and Kohl’s are both in the process of launching lower-priced outlet stores.

Macy’s CFO Karen Hoguet told investors that healthcare, electronics, and home improvement are getting a bigger share of consumer dollars.

Younger consumers are also moving away from brand names and logos, a trend that is also killing teen retailers like Abercrombie & Fitch and Aeropostale.

High-end department store Bloomingdale’s, which is also owned by Macy’s, was also hurt by the discounting consumers increasingly demand.

People who make between $US100,000 and $US250,000 are “making very careful decisions” on discretionary purchases, luxury-marketing expert Pam Danziger told Bloomberg.

“That’s smart for them, but it’s certainly not good for the economy,” she said.

Companies including Ralph Lauren, Coach, and Michael Kors are going after consumers ages 25 to 34 with money to spend but who aren’t rich, Danziger said in a recent report.

These customers make up 18% of households, but as they suffer sluggish income growth, they are increasingly conservative with their dollars.

Retail expert Robin Lewis writes that consumers won’t pay full price because they have become addicted to promotions.

“With coupons, discounts, loyalty points and gifts-with-purchase more the rule than the exception today, consumers are spending less because they can,” he writes.

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