By Becky Ebenkamp

Remember that neat term “affordable luxury”? It was built on the idea that splurging on everyday things was safe, good, and maybe even patriotic. Well, too bad for all the retailers whose marketing centered on indulgence buying—affordable or not. These days, unless it’s a flat-out bargain, most shoppers just don’t want to hear it.

“It’s a shake-out of the indulgence and [a move toward] let’s get real,” says Candace Corlett, president of New York-based WSL Strategic Retail, which recently released a report entitled How America Shops in a Crisis. It’s not that Americans feel they don’t deserve to be pampered by Bloomingdale’s, or even Target; it’s just that the recession has caused a kind of shopping reality check. According to Corlett, people are even taking a sort of righteous pride in saying, “We can’t afford that anymore.”

Half the women that WSL surveyed said they’re avoiding stores where they’d be tempted to overspend. The channels that are taking the biggest beatings: malls (67 percent), department stores (56 percent) and specialty clothing shops (52 percent). The report concluded that, for three quarters of shoppers, the lowest price is now top priority.

That’s little comfort for the likes of Nordstrom or The Sharper Image, but it’s great news for Walmart and Amazon.com. “Both showed strong sales growth in the first quarter, which really set them apart from the pack,” Corlett says. “The dollar stores—Family Dollar, Dollar General—are in a great position right now, too. Everybody else is struggling. No one else has that reputation of best price for the money.”

Corlett clarified that this doesn’t mean consumers won’t ever spend a little extra to get brands that they trust, only that they want those brands at the best price they can find. To this end, the Web has simplified the bargain-hunting process. “That’s the beauty of the Internet: People don’t have to waste gas to find out,” she said.

A smart move on Walmart’s part: Bundling products to simplify the buying process. Combining, say, a bicycle, the helmet and the kneepads and selling them as a $79 set makes for an easier mental transaction and only one painful purchasing decision versus three. Walmart has bundled the Wii with accessories, too. Can a Wii be bought at Target or a load of other stores? Sure—but Walmart has the edge, Corlett says, because consumers perceive the chain as their “pricing pal.”

JCPenney, on the other hand, has tried to reward shoppers with aspirational brand names and designs, but consumers seem less than excited. The mid-tier retailer introduced its American Living collection with designer Ralph Lauren right as gas prices were peaking at $4 a gallon. “That’s not the message of the times,” Corlett said.

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