Retailers Declare Truce in Pricing Wars

In the latest pitched battle between price and product it seems product may have claimed the higher ground -- at least according to the retailers who convened at the Oppenheimer Consumer, Gaming, Lodging & Leisure Conference in Boston last week.

"Retailers need to wean consumers off discounts," Marshal Cohen, chief industry expert at the NPD Group told 600 institutional investors at the conference. "We can't have another holiday season with 70% markdowns."

Cohen cited Nintendo as a company that lures customers through innovative and compelling product rather than price. "By limiting the supply of its gaming consoles, Nintendo doesn't get caught up in excess merchandise and doesn't need to resort to lowering prices."

It's not alone. Urban Outfitters(URBN), for example, has never stooped to excess promotions or discounts, even when rivals like Abercrombie & Fitch(ANF) and American Eagle Outfitters(AEO) began slashing prices.

Instead, the apparel chain stocks product "broad and shallow rather than deep and narrow," CFO John Kyees said during the conference. Thus, their stores boast a wide variety of styles, but not many of each item.

"We have trained consumers to buy product they love when they see it instead of waiting for a sale," Kyees said during an exclusive interview with TheStreet during the conference. "We have been able to successfully sell more items at full price by creating a sense of urgency and scarcity."

As a result, Urban Outfitters posted record earnings in 2008, at a time when most retailers were already feeling the pangs of the recession.