Retail Therapy Is Cheaper Than Ever

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BOSTON (TheStreet) -- The lingering hangover of the recession has replaced the one-time mantra of "shop till you drop" with the new pricing strategy of "drop till they shop."

America has gone on sale, from traditional holiday gifts like electronics and basics such as food and housing to big-ticket items including cars.

Retailers are expecting the worst this holiday season after American shoppers from around the country said a year ago they planned to spend an average of $431 on gifts in 2008, a drop of 50% from a year earlier. Consumers will follow the same spending pattern this year, according to a poll by Harris Interactive.

Books and movies are taking front and center of the holiday season's price wars. Wal-Mart (Stock Quote: WMT), Amazon (Stock Quote: AMZN) and Target (Stock Quote: TGT), in particular, have escalated tit-for-tat out-pricing on DVDs, Blu-ray discs and best-selling books. In the case of DVDs, when Amazon instituted a $9.99 price point for select titles, Wal-Mart retaliated by undercutting the Internet retailer by a penny.

Not only big-box stores are offering discounts to lure shoppers. Even upscale retailers like Tiffany (Stock Quote: TIFF), Coach (Stock Quote: COH) and Williams-Sonoma (Stock Quote: WSM) have cut prices as the recession dragged on longer than at any time since the 1930s.

Starbucks (Stock Quote: SBUX), home of the $6 coffee, has dropped the price of lattes and iced coffee in some markets. How do you say "bargain" in fake Italian?

Across a slew of sectors, bargains and price breaks intensified as 2009 draws to a close, leading up to a holiday-shopping season that may make or break some stores.

FOOD

According to an October study by the American Farm Bureau, retail food prices in 29 states decreased for the fourth consecutive quarter and "are significantly lower than one year ago."

Retail prices for the most widely purchased food fell from a year earlier: whole milk, 27%; cheddar, 23%; potatoes, 22%; apples, 19%; eggs, 16%; vegetable oil, 16%; and ground chuck, 10%.

Items that bucked the trend and went up in price were bacon, orange juice and flour.

Food costs, however, can be tricky to gauge for consumers as manufacturers increasingly are packaging their goods in smaller packages. Where you live can also make a difference. Expect to pay more for a gallon of milk in New York City than you will in Wisconsin.

SMART PHONES

Even in a down economy, people still can't get enough of smart phones. But even as consumers gobble up the latest offerings by Apple, Research in Motion and Motorola, the price tag for these hand-held wonders is starting to drop.

According to forecasters with ABI Research, the greatest increase in smart-phone shipment volume over the next five years will be found in the $100 to $200 range. While only 18% of smart phones were priced less than $200 in 2007, 27% have cracked that mark this year. The research firm expects that by 2014, almost 45% of smart phones will hit that price point.

"Prices will hold at a certain point," says Kevin Burden, ABI's mobile devices practice director. "We may never see a $30 smart phone. But over time, smart phones will take a substantial part of the mainstream handset market."

HOUSING

Homes and apartments are at the lowest levels this decade.

According to Moody's, apartment prices nationwide declined 24% during the past year. On the East Coast, prices dropped the least, just 6%. In the South, they plummeted 44%.

Sales of new homes dropped unexpectedly last month as the effects of a soon-to-expire tax credit for first-time owners started to wane. (The credit is being renewed.)

The median sales price in October of $204,800 was off 9.1% from $225,200 a year earlier, but up 2.5% since August, according to the National Association of Realtors.

CLOTHING

If you're a guy in need of a new outfit, you're in luck. According to the U.S. Department of Labor, men's and boy's apparel prices have dropped 5.1% during the past six months. By comparison, women's and girl's clothing prices have risen 5.9%.

CARS

These are tough times for automakers but a good time for anyone looking for new wheels.

Including finance charges, the total cost of buying an average-priced light vehicle was $26,500 in the third quarter, down 5% from a year earlier, according to the Auto Affordability Index compiled by Detroit-based Comerica Bank.

Recession-spurred rebates and financing deals were credited for the increased affordability.

TECHNOLOGY

They hit the market as something of a novelty, but net books have caught on. With the right deal (sometimes connected to the purchase of a wireless connectivity card and service) you can grab one for around $200.

Almost 35 million net books will be shipped by manufacturers in 2009. The price-driven aspect of that success has some industry watchers speculating that basic laptops could drop to the $500 range in response.

Components have similarly come down in price. A terabyte of hard-drive space, once priced only within reach of corporations, can now be found for under $100.

Gamers will also have a few extra bucks in their pockets if they shop around. Various configurations of Sony's PS3 and Microsoft's Xbox have dropped to $299. The Wii, once believed to be frozen in price, is now on shelves for $199. For the most part, despite the hardware pricing, most games have retained their price points, a trend that may skew upward in response to the success that "The Beatles: Rock Band" had despite its $59 price tag.

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