Ten Surprising Sale Items

Prices of luxury goods and services are being knocked down to earth with unprecedented discounts.

In Pictures: 10 Surprising Sale Items

Trey Shores, 36, recently scored a fantastic deal. The Tokyo-based consultant scooped up an in-season Helmut Lang leather jacket in the city's Ginza district for 50% off the regular price. What was an out-of-reach $2,000 became a more reasonable $1,000 "just like that," says Shores. "I'm quite proud of [it]."

He's certainly not the only consumer benefiting from the financial hardship of retailers. From clothing to travel to cars, companies are being forced to reduce prices at a never-before-seen clip as the global economy continues to shrink.

In Depth: 10 Surprising Sale Items

In the U.S., consumer spending in the fourth quarter of 2008--which accounts for more than two-thirds of domestic economic activity--decreased by 4.3%, according to the Commerce Department. That's the worst decline since the second quarter of 1980. And while retail store sales were up 1% in January 2009 to $344.6 billion when compared with December 2008, and overall consumer spending was up 0.6% during the same period, the government has attributed those increases to massive markdowns on inventory. For many retailers, bargaining with consumers is the only option. In other words, it's a buyer's market.

More Deals, Fewer Restrictions
Kathryn Finney, editor of the the Budget Fashionista, a Web site that caters to fashion-savvy shoppers on a budget, says that right now shoppers are likely to find more deals with fewer restrictions. For example, coupons from department stores typically excluded products from the beauty counter, such as perfume or makeup. Not anymore.

Finney recently used a Saks (nyse: SKS - news - people ) friends and family coupon to buy her favorite Giorgio Armani Hydro Glow foundation at 15% off $57, which knocked the price down to $48.45 (before tax). "I buy most of my makeup at Target, but I splurge on this foundation because of the quality," says Finney. "This is the first time I've ever purchased it at a discount."

And while shoppers are the true winners in this discount war, some retailers are benefiting as well. Take discounted designer goods Web site Bluefly.com. The site is currently featuring several coveted Hermès handbags at up to 40%. You won't find the brand's popular Kelly or Birkin bags, but you will find a gray herringbone twill "Jumping" tote, discounted by 20% to $1,480. Recently, a black pebble leather Bolide was been marked down by 49% from $8,400 to $4,300 (the piece sold out soon thereafter).

Melissa Payner, CEO of Bluefly (nasdaq: BFLY - news - people ), says that exclusive deals like this have kept customers spending. Although Bluefly won't release 2008 full-year and fourth-quarter results until March 11, the company did see significant growth in last year's third quarter. Sales increased by 10% to $19.8 million, and gross profit increased 28% to $7.3 million when comparing both with the third quarter of 2007.

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"As we've become more well known, more and more designers have become interested in working with us," says Payner. An elevated brand list combined with an overall consumer desire to get more value for their money has aided Bluefly's success. "We've seen growth in our customer file, e-mail subscribers and the word 'Bluefly' as a Google search term."

The U.S. economy isn't feeling the holiday cheer this year, as sluggish growth and the prolonged housing crisis fail to let up.

The rate of existing home sales plunged a record 8.6% in November, with falling prices faring no better, a real estate trade group said Tuesday.

The report is a blow to the Federal Reserve and Treasury Department, which have been acting aggressively to bring down mortgage rates and revive the U.S. housing market. Thus far, the effort has yielded mixed results at best, and the Census Bureau and realtors' figures are expected to reflect more of the same: declining sales.

Meanwhile, the National Association of Realtors said the median home price fell 13.2% on an annual basis, down for a fifth straight month to $181,300. It was the largest drop since the current data series began in 1968 and probably the largest since the Great Depression, said Lawrence Yun, the chief economist for the National Association of Realtors.

The pace of sales fell to a 4.49-million-unit annual rate. Economists polled by Reuters were expecting home resales to set a 4.90-million pace. October's figure was revised downward to 4.91 million, from 4.98 million.

"The quickly deteriorating conditions in the job market, stock market and consumer confidence in October and November have knocked down home sales to another level," Yun said.

The Reuters/University of Michigan Surveys of Consumers said its final index reading of confidence for December rose to 60.1, from November's 55.3. Don't get too excited, though: The report noted that, absent the gain due to unusually steep pre-holiday price discounts, the sentiment index would be virtually unchanged.

Sharply lower consumer spending in the United States and other high-income countries is stalling global trade, causing a surprise downturn in exports from China that is dramatically slowing its economy and rippling through other countries that rely on international commerce.

Investors uneasy about the holiday shopping season gave back some of Wall Street's recent gains Monday, sending the Dow Jones industrial average down more than 360 points.

While initial reports about the start of holiday shopping this weekend suggested sales were better than some retailers and analysts expected, Americans are clearly extremely cautious. That has Wall Street concerned about the impact of a continuing drop in consumer spending on the economy.

According to preliminary figures released by RCT ShopperTrak, a research firm that tracks total retail sales at more than 50,000 outlets, sales rose 3 percent to $10.6 billion on Black Friday - the day after Thanksgiving that is traditionally one of the biggest shopping days of the year. But some analysts are concerned that Black Friday's results aren't indicative of the rest of the weekend.

"After a slow start to November, we believe strength on Black Friday was not enough to save the month," said John Morris, an analyst at Wachovia Capital Markets. "The strength did not carry through the remainder of the weekend, as business fell off sharply on Saturday, according to our field team."

RCT ShopperTrak is expected to release data for the combined Friday and Saturday period on Monday.

Wall Street is concerned that consumers, by curtailing their spending further, won't be able to help lift the economy from its slump.

Meanwhile, a pair of downbeat economic reports did little to alleviate investors' concerns. The Institute for Supply Management, a trade group of purchasing executives, said its index of manufacturing activity fell to a 26-year low in November. At the same time, the Commerce Department said construction spending fell by a larger-than-expected amount in October.

Both the housing and manufacturing sectors have been suffering for some time, so the reports were ultimately unsurprising. Still, they served as further evidence that the economy remains under pressure.

Some stock selling was to be expected Monday considering the magnitude of last week's advance, when stocks posted some of their steepest gains in decades. The Dow has gained 16.9 percent and the S&P 500 index 19.1 percent since a rally that began Nov. 21; it was the first five-day string of gains for both the Dow and the S&P 500 since July 2007.

In midmorning trading, the Dow Jones industrial average fell 365.66, or 4.14 percent, to 8,463.38. Standard & Poor's 500 index dropped 42.36, or 4.73 percent, to 853.88, while the Nasdaq composite index fell 69.64, or 4.54 percent, to 1,465.93.

Cyber Monday may not be the digital shopping extravaganza it was once purported to be. But even if consumers are spreading out their online sales, cybersecurity firm Webroot software believes the Monday after Thanksgiving will still be a special day: The company issued a warning last week that Dec. 1 is still the most likely 24 hours of the year to have your banking information stolen by cyber fraudsters.

That's been a common refrain from security researchers in years' past. And Webroot's recommendations--including updating security software and buying from trusted sites--makes sense. But just how worried should online shoppers be? (Back to main story: "Holiday E-Deals Come Early.")

Much of the hype around Cyber Monday's cyber threats is overblown, says Patrik Runald, a security researcher with software company F-Secure. To steal your banking codes while you use a site like Amazon.com (nasdaq: AMZN - news - people ) or eBay (nasdaq: EBAY - news - people ), hackers would need to place hidden "keylogger" software on your computer. And F-Secure, he says, has never tracked a spike in that kind of malicious software either on Cyber Monday or even in the weeks leading up to it. This implies that hackers aren't using the opportunity to infect PCs for future fraud, either. "Cyber Monday is just another day for us," he says.

There are still reasons to shop with care. Runald warns of Cyber Monday-themed "phishing" e-mails that impersonate messages from legitimate sites and send consumers to lookalike pages designed to steal passwords, he says. Security researchers have also warned that search engines could be populated with fake pages that impersonate retailers.

But navigating directly to a known site will be as safe on Monday as it would be on any other day. In fact, while F-Secure tracks about 30,000 new samples of malicious software daily, Runald says he rarely sees noticeable bursts of new identity theft software.

"We don't really have doomsdays anymore,” he says. "We get so many new samples all the time that it's hard to see a spike on any particular day.” (Back to main story: "Holiday E-Deals Come Early.")

U.S. Consumers Dropping Shopping

Bernanke holds out rate-cut hopes as government reports October retail sales dive.

Wall Street heads into another turbulent week with investors set to pore over a government report on retail sales and earnings from Wal-Mart Stores Inc. to get a better reading on the consumer.

There are growing signs that the deepening economic slowdown has caused Americans to tighten their purse strings. There was fresh evidence of this past week when retailers posted the worst October same-store sales in 35 years -- and analysts believe the upcoming holiday shopping season could be among the slowest in decades.

With consumer spending driving more than two-thirds of the U.S. economy, investors will be paying close attention to earnings outlooks for some of the nation's biggest retailers. Wal-Mart, the nation's biggest retail chain, will post results on Thursday. Kohl's Corp., JCPenney Co., Macy's Inc., and Abercrombie & Fitch Co. are scheduled to release reports as well.

Investors will get an overall picture of consumer spending on Friday when the Commerce Department releases its October retail sales index. The closely watched gauge is expected to show sales dropping 1.2 percent for the month after falling 1.2 percent in September. Excluding the battered automobile industry, sales are expected to have fallen 0.9 percent.

The market, still trying to recover from October's devastating losses, will likely zigzag as investors react to these reports. This has been the pattern during the past few weeks, with major indexes swinging from one extreme to another in capricious trading.

Many analysts believe this volatility is part of a bottoming-out process. The real test is to see in the coming days if investors have already priced in the potential for negative news or if fear of a protracted recession will trigger another stream of selling.

"The news is going to be really bad, and that shouldn't be a surprise to investors," said Peter Cohan, principal of Peter S. Cohan & Associates. "But, I'm feeling uncomfortable that the market is a daily mood ring for the economy. The small investors are largely out of the market, and what you end up with is a small number of very large players making decisions."

Cohan pins the volatility on hedge funds, pension funds, and big university endowments unloading stocks to raise collateral and scooping up undervalued stocks to seize opportunity. He believes this will eventually result in a more stable trading environment that will lure retail investors back, and add stability to major indexes.

Hedge funds could come to center stage this week if they receive another wave of redemption requests from investors. The upcoming Nov. 15 deadline for redemptions could cause further instability in the market, Cohan said.

Wall Street had enjoyed its biggest Election Day rally in history last Tuesday, but could not cling to those gains. This was followed by a two-day loss of about 10 percent in the major indexes, including a 929-point drop in the Dow, as investors turned their focus once more to the economy's woes.

For the week, the Dow Jones industrial average and broader benchmarks such as the Standard & Poor's 500 index lost about 4 percent after surging 10 percent or more the week before. Technical analysts are keeping a close eye on all the data this week, with continued concerns that the Dow will test its Oct. 10 intraday low of 7,882.51.

Stock futures trading early Sunday evening showed a slightly positive start for the markets. S&P 500 futures gained 0.83 percent, while Nasdaq 100 futures rose 0.66 percent.

There are a number of other reports on tap that might give more insight into the economy. On Thursday, Wall Street gets readings on the labor market and trade deficit, followed by a look at consumer sentiment on Friday. Trading on Tuesday could be more subdued with the bond market and some banks closed due to Veterans Day.

Additionally, investors are watching for developments with General Motors Corp., Chrysler and Ford Motor Co. after the automakers met with Congressional leaders last week to secure financial help.

Democratic leaders in Congress asked the Bush administration on Saturday to provide more aid to the struggling auto industry, which is bleeding cash and jobs as sales have dropped to their lowest level in a quarter-century. House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid said in a letter to Treasury Secretary Henry Paulson that the administration should consider expanding the $700 billion bailout to include car companies.

"We must safeguard the interests of American taxpayers, protect the hundreds of thousands of automobile workers and retirees, stop the erosion of our manufacturing base, and bolster our economy," Pelosi, D-Calif., and Reid, D-Nev., wrote.

Even more news might be generated out of Washington with the possible selection of a new Treasury secretary by President-elect Barack Obama. He has already identified that the economy is the new administration's biggest priority, and a Treasury pick could lift stocks.

Among those being considered for the post include former Treasury Secretary Lawrence Summers, Federal Reserve Bank of New York President Timothy Geithner, and former Federal Reserve Chairman Paul Volcker.

WASHINGTON -- Consumer spending dropped in September by the largest amount in four years, while incomes suffered because of Hurricane Ike.