People walk through 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 skyrocketed and credit card interest rates are rising, but shoppers can expect some relief when they start Christmas shopping.
Retailers, desperate to get inflation-weary consumers to spend, are expected to step up promotions while struggling to shed already reduced overstock.
“This will be the year of the everlasting Christmas deal,” said Marshal Cohen, chief industry advisor for the NPD Group, a market research firm.
According to Adobe Analytics, which tracks online sales, goods in some gift categories have been reduced by more than 20% on retailers’ websites. Computers, electronics and toys are expected to hit the deepest discounts since Adobe started collecting numbers in 2017.
The plethora of offerings is a marked departure from a year ago. Last Christmas, shoppers started buying gifts early to avoid stock outs and shipping delays. Concerns about not getting hot items meant consumers were willing to pay for it.
This year, however, retailers have an abundance of goods. Shoppers are reluctant to spend as they pay more for groceries, housing, health care and other items as inflation hovers around a four-decade high. People are spending more on travel and experiences even after more than two years of Covid restrictions.
Even with the bigger discounts, industry watchers expect a subdued holiday season due to tight household budgets. Consulting firm Bain & Co. is forecasting growth of up to 7.5% from last holiday season, but it’s only 1% to 3% after adjusting for inflation. Consulting firm Alix Partners is forecasting a 4% to 7% year-over-year increase in revenue — but that’s a downturn when you factor in the current inflation rate of 8.2% year over year.
“It’s about food, medical care, shelter and accommodation costs. It’s about basic services like veterinary care and childcare,” said Leo Feler, chief economist at market research firm Numerator. “All of these things come first before consumers buy Christmas gifts.”
Also, customers may not even want some of the items that retailers have for sale. Computers, the category that Adobe says is likely to receive the highest level of discounts during the holiday season, has seen demand fall. HP, Dell and Lenovo have all reported a drop in PC shipments.
The return of heavy discounts will be a hard pill for businesses. It’s putting pressure on retailers’ profit margins as they juggle higher costs. Already Walmart, target and best buy have lowered their earnings prospects as retailers navigate a more promotional environment. Walmart executives said even higher-income households are trading down to buy cheaper groceries, raising concerns they may be reluctant to lavish on gifts, decor and other holiday items.
parade of promos
As shoppers lounged by the pool and headed off on their long-awaited vacation this summer, the promotional drums were beating was already underway. More items were sold during the backyard barbecue season than during the peak holiday season a year ago.
In the second week of July, 46% of the units were on sale, according to the NPD Group. That’s more than the 41% of units on sale during the fourth week of November 2021 – the kick-off to the holiday shopping season.
When Amazon hosted its Prime Day in July, Walmart decided not to host its own sales event because so many of its goods were already on sale.
Sales have also picked up again in recent weeks. In October, Amazon held a Prime Day-like sales event, the first time it had two discount days in the same year. Target and Walmart also got an early start, as Target’s Deal Days occurred a week before the Amazon event and Walmart’s Rollback & More event overlapped with it.
This week, Walmart announced it will have savings events beginning every Monday in November on its website and then continuing in its stores. Customers who belong to the Walmart+ subscription service get seven hours early access to special offers and popular items.
Promotions will be particularly pronounced in certain categories. According to YipitData, a research firm that collects data from consumer receipts and crawls retailers’ websites, apparel and the sports & outdoors category at Walmart and Target have already seen a notable increase in discounts in September compared to the same period last year.
For example, clothing items at Walmart were sold at a discount of about 20%, up from about 7% in 2021 for the two-week period ended September 17. At Target, apparel items were sold at a discount of about 18%, up from about 4% in the year-ago period.
A clearance sale sign is seen at the Gap retail store on September 20, 2022 in Los Angeles, California.
Allison Dinner | Getty Images
Discounts on beauty, on the other hand, were few – perhaps reflecting consumers’ willingness to continue spending on self-care or small luxuries like lipstick and lotion, even when budgets are tight elsewhere. discount levels above Ultimate beauty Categories were either stable or slightly down year-on-year in the two weeks ended Sept. 17, YipitData noted.
The amount of rebates by retailers will also depend on their customer base, Numerator’s Feler said. For example, dollar stores or other discounters need to be more sensitive to consumers’ budget constraints. But luxury brands that have higher-income customers won’t have to adjust as much as sales in this category remain strong.
For shoppers like Rebecca Kirschner, the campaigns of the last six months are a welcome change. The New York City resident and her fiancé just booked their wedding and almost everything was on sale
A year ago she remembered empty shelves. This holiday season, she expects the money she spends on family and friends to go further.
“It feels like walking from half a plate of food to a buffet,” said Kirschner, 33. “Every store you walk into has a big sales section now.”
