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Stores hope upscale gifts will draw buyers

A shopper looks at the 125 carat Teddy Bear on sale at Macy's for US$32,000 on Tuesday in New York. PHOTO: AP

When Americans shop for diamond bracelets this holiday season, BJ's Wholesale Club Inc probably won't be the first retailer they think of. But luxury goods are finding their way into warehouse clubs and other low-to-moderate price retailers who want to be part of the boom in upscale merchandise.

J. Crew Group, Wal-Mart Stores and Macy's are among the merchants offering pricier items such as US$800 diamond earrings and US$1,800 shearling coats, this holiday season.

It's part of a strategy to appeal to customers across the economic spectrum.

Macy's famed Manhattan store, for example, will be selling luxury toys, a merchandise category it abandoned in the late 1980s.

The lineup includes a US$32,000 diamond-encrusted teddy bear, as well as US$3,000 stuffed giraffes and US$3,000 stuffed mohair lions made by Steiff.

When retailers began moving upscale in early fall, they were expecting a downbeat holiday season overall, as Hurricane Katrina pushed already high gasoline prices past US$0.80 a liter, hurting the middle-income shopper.

The fear was that most people would cut back during the holidays, so retailers decided to pursue the more well-heeled consumer.

Now, with energy prices retreating somewhat, the stores will be aggressively courting customers in every way they can as holiday shopping begins today, from offering ultra luxurious items to aggressive discounting.

"They are all trying to put their best foot forward," said John Morris, an analyst at Harris Nesbitt. "Retailers are not going to know [their fate] until the dust begins to settle. The mood is bright, but they are still going to be aggressive."

So far, there doesn't seem to be any particular must-have items this season besides flat-screen TVS and the latest new game console from Microsoft -- Xbox 360. That's contributed to a drive by merchants to get consumers to shop earlier this holiday season. Wal-Mart, for example, started its holiday promotions on Nov. 1, two weeks earlier than usual. And stores including Wal-Mart and J.C. Penney Co will open earlier than usual today.

"Stores have to be promotional because that is where the consumer is right now," said Britt Beemer, chairman of America's Research Group, based in Charleston, South Carolina.

Business does look better than it did two months ago, when Katrina hit. Sales were better last month after a slowdown this summer; falling energy prices helped.

"I'm glad gas went down a little bit. I feel a little better with my shopping now that I would have a couple of weeks ago," said Alfreda Franklin, of Marietta, Georgia, who was shopping at a local Wal-Mart.
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