People walk past discount stores at a shopping center in Santa Anita, California on December 20, 2021.
Frederick J. Brown | AFP | Getty Images
Grocery and energy prices are up, and credit card interest rates are going up, but shoppers can expect some relief when they start holiday shopping.
Retailers, striving to impress inflation-weary consumers, are expected to boost promotions as they struggle to get rid of excess inventory that has already been identified.
“This will be the year of the permanent Christmas deal,” said Marshall Cohen, senior industry advisor to NPD Group, a market research firm.
In some gift categories, merchandise can be marked by more than 20% on retailers’ websites, according to Adobe Analytics, which tracks online sales. Computers, electronics, and games are expected to hit discount highs since Adobe began tracking numbers in 2017.
The abundance of deals is a sharp departure from what it was a year ago. This past holiday season, shoppers started buying gifts early to avoid running out of stock and shipping delays. Concerns about not getting hot items meant consumers were willing to pay.
This year, though, retailers have an abundance of merchandise. Shoppers are reluctant to spend because they pay more for food, housing, health care and other items as inflation hovers around its highest level in four decades. People are also spending more on travel and experiences after more than two years of Covid restrictions.
Even with bigger discounts, industry watchers expect a silent holiday season due to extended family budgets. Bain & Co. Consulting Company. It projects 7.5% growth over last holiday season, but when adjusted for inflation, it’s only 1% to 3%. Consulting firm Alex Partners expects sales to increase 4% to 7% year over year – but that’s a drop when factoring in the current annual inflation rate of 8.2%.
“It’s food, medical care, housing and shelter costs. It’s basic services like veterinary care and childcare,” said Leo Feller, chief economist at market researcher Numerator. “All of these things come first before consumers buy holiday gifts.”
In addition, customers may not even want some of the items that retailers offer for sale. Computers, which are expected to enjoy the highest level of discount during the holiday season, according to Adobe, have seen cooling demand. HP, Dell, and Lenovo all reported a drop in PC shipments.
The return of big cuts will be a hard-to-swallow medicine for businesses. It squeezes retailers’ profit margins, as they juggle rising costs. Indeed, WalmartAnd the license plate And the best buy They lowered their earnings expectations as retailers navigate a more promotional environment. Walmart leaders have said that even high-income families are pulling back to buy cheaper groceries, raising concerns that they may be reluctant to squander gifts, decor and other holiday items.
Parade of boredom
While shoppers have been lounging by the pool and going on long-awaited vacations this summer, the drumbeat of promotions It was already underway. More items were sold during backyard barbecue season than during peak season a year ago.
During the second week of July, 46% of units were under upgrade, according to the NPD Group. This is up from 41% of units offered for promotion during the fourth week of November 2021 – the start of the holiday shopping season.
When Amazon held its main day in July, Walmart chose not to participate in its sales event because a lot of its merchandise was already on sale.
Sales have picked up again in recent weeks, too. In October, Amazon held a sales event similar to Prime Day, the first time it had two discount days in the same year. Target and Walmart started early, too, with Target’s Deal Days running a week before the Amazon event and overlapping Walmart’s Rollback & More event.
This week, Walmart announced that it will hold savings events that begin every Monday in November on its website and then continue in its stores. Customers who belong to the subscription service, Walmart+, will get access to hot deals and popular items seven hours in advance.
Promotions will be particularly visible in certain categories. The apparel and sports and outdoors category already made a noticeable jump in discounts at Walmart and Target compared to the same period last year in September, according to YipitData, a research firm that collects data from consumer receipts and removes retailer’s websites.
For example, at Walmart, clothing items sold for about 20% off, up from about 7% in 2021 for the two-week period ending in September. 17. At Target, apparel items are selling for about 18% off, up from about 4% in the same period last year.
A clearance sale sign appears at the Gap retail store on September 20, 2022 in Los Angeles, California.
Alison’s dinner | Getty Images
Beauty, on the other hand, had few discounts — which may reflect consumers’ desire to continue spending on self-care or little luxuries like lipstick and lotion, even if budgets are tight in other areas. Discount levels via Ulta Beauty Categories were either stable or slightly lower year-on-year for the two weeks ending September 11. 17, YipitData was found.
Numerator’s Villiers said the level of discount by retailers will also depend on their customer bases. For example, dollar stores or other discounters will need to be more sensitive to consumers’ budget constraints. But luxury brands, which have high-income clients, won’t have to adjust as much, with sales in this category staying strong.
For shoppers like Rebecca Kirschner, promotions over the past six months represent a welcome change. The New York City resident and her fiancé had just signed up for their wedding, and just about everything was on sale
A year ago, I remembered that the shelves were empty. This holiday season, expect that the money you spend on family and friends will go even further.
“Looks like you’ve gone from half plate food to buffet. Every store you go to has a big sales department now,” said Kirchner, 33.