Bargains will dominate the holiday season, but shoppers may not be sold

Bargains will dominate the holiday season, but shoppers may not be sold

People walk past stores offering sales at a mall in Santa Anita, California on December 20, 2021.

Frederic J. Brown | AFP | Getty Images

Grocery and energy prices have soared and credit card interest rates are climbing, but shoppers can expect some relief when they start shopping over the holidays.

Retailers, desperate to entice inflation-weary consumers to spend, are expected to step up promotions as they struggle to get rid of already reduced excess inventory.

“This will be the year of the perpetual deal for Christmas,” said Marshal Cohen, senior industry adviser for the NPD Group, a market research firm.

In some gift categories, merchandise could be marked down by more than 20% on retailer websites, according to Adobe Analytics, which tracks online sales. Computers, electronics and toys are all set to hit the highest discount levels since Adobe started tracking the numbers in 2017.

The abundance of offers is a dramatic change from a year ago. During the holiday season, shoppers started buying gifts early to avoid stock-outs and shipping delays. Concerns about not getting hot items meant consumers were willing to pay.

This year, however, retailers have an abundance of merchandise. Shoppers are reluctant to spend as they pay more for food, housing, healthcare and other items as inflation hovers around a four-decade high. People are also spending more on travel and experiences after more than two years of Covid restrictions.

Even with deeper discounts, industry watchers expect a muted holiday season due to stretched household budgets. Consulting firm Bain & Co. predicts growth of up to 7.5% from last holiday season, but when adjusted for inflation, it’s only 1% to 3%. Consulting firm Alix Partners forecasts a 4% to 7% increase in sales year-on-year, but this is a decline when taking into account the current inflation rate of 8, 2% year over year.

“It’s food, it’s medical care, it’s housing and accommodation costs. It’s essential services such as veterinary care and childcare,” said economist Leo Feler. chief at Numerator. “All of these things come first before consumers buy holiday gifts.”

Moreover, customers may not even want some of the items that retailers put up for sale. Computers, the category expected to have the highest discount tier this holiday season, according to Adobe, saw a slowdown in demand. HP, Dell and Lenovo all reported lower personal computer shipments.

The return of deep discounts will be a tough pill for businesses to swallow. This puts pressure on retailers’ profit margins as they juggle higher costs. Already, Walmart, Target and best buy have reduced their profit outlook as retailers navigate a more promotional environment. Walmart executives said even higher-income households are negotiating to buy cheaper groceries, raising concerns they are reluctant to splurge on gifts, decor and other items vacation.

Promo Parade

As shoppers lounge by the pool and head off on long-awaited vacations this summer, the pace of promotions was already underway. More items were on sale during barbecue season than during the peak holiday season a year ago.

In the second week of July, 46% of units were on sale, according to the NPD Group. That’s more than the 41% of units on sale in the fourth week of November 2021 – the kickoff of the holiday shopping season.

When Amazon kicked off its Prime Day in July, Walmart pulled out of its own sale event because much of its merchandise was already on sale.

Sales have also picked up in recent weeks. In October, Amazon held a Prime Day-like sales event, the first time it had two days off in the same year. Target and Walmart also started early, with Target’s deal days occurring a week before the Amazon event and Walmart’s Rollback & More event overlapping with it.

This week, Walmart announced that it would be holding savings events that would begin every Monday in November on its website and then continue in its stores. Customers who belong to its subscription service, Walmart+, will get access to great deals and popular items seven hours earlier.

Promotions will be particularly marked in certain categories. Clothing and the sports and outdoor category have already seen a notable increase in discounts at Walmart and Target compared to the year-ago period in September, according to YipitData, a research firm that collects data from receipts from customers. consumers and scrapes retailer websites.

For example, at Walmart, clothing items are sold at a discount of around 20%, compared to around 7% in 2021 for the two-week period ending September 17. At Target, apparel items are being sold at a discount of around 18%, down from around 7% in 2021. 4% in the period a year ago.

A clearance sale sign is seen at the Gap retail store on September 20, 2022 in Los Angeles, California.

Dinner Allison | Getty Images

Beauty, on the other hand, saw few discounts, which may reflect consumers’ willingness to continue spending on personal care or small luxuries like lipstick and lotion, even as budgets are tight in other countries. other areas. Discount levels across Ultimate beauty categories were either flat or slightly down year-over-year for the two weeks ended Sept. 17, YipitData found.

Retailers’ discount level will also depend on their customer base, Numerator’s Feler said. Dollar stores or other discounters, for example, will need to be more sensitive to consumer budget constraints. But luxury brands, which have higher-income customers, won’t have to adapt as much, as sales in the category remain strong.

For shoppers like Rebecca Kirschner, the promotions of the past six months mark a welcome change. The New York resident and her fiancé just registered for their wedding, and almost everything was on sale

A year ago, she remembered that the shelves were emptier. This holiday season, she expects the money she spends on her family and friends to go further.

“It’s like you’ve gone from half a plate of food to a buffet,” Kirschner, 33, said. “Every store you go to now has a large sales section.”

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