Can retailers wean consumers off discounts this holiday season?
Retailers are expected to reduce the number of items they put on sale this holiday season, and the discounts that are offered will probably be much closer to everyday prices than they’ve been in the past. The likelihood of this proving true throughout the balance of 2021 has been made possible by a number of pandemic-related factors including supply chain disruptions, limited inventories and the reality that many retailers are still trying to claw back profits after they saw their sales and earnings take a hit in 2020.
The good news is that one forecast after another has this year’s Christmas building on last year’s 5.8 percent gain. Deloitte is expecting sales to be up seven to nine percent over 2020, with online growing in the 11 percent to 15 percent range.
A shortage of goods on store shelves has made it easier for retailers to limit the number of items they put on deal. Adobe Analytics found that out-of-stocks on goods in 18 categories sold online were up in August by 24 percent year-over-year.
“We’ve never seen it as high as this for the 10 years or so that we’ve done this report. It’s a record,” Taylor Schreiner, director with Adobe Digital Insights, told CNN.
A Wall Street Journal article yesterday pointed out that fewer and lower discounts will likely boost retail profit margins but also suggested that it could reduce overall spending by consumers in a year when product prices have steadily risen.
Michelle Keldgord, a 28-year-old blogger who lives in Redlands, CA, told the Journal, “I’m definitely going to buy less this year. Every time I go to the store, the prices are higher, which is cutting into the budget.”
Retailers have been mostly upbeat about their prospects for profitable selling during the holidays.
The Journal article cited statements made by CFO’s from Gap and Macy’s at an investor conference last month.
Adrian Mitchell, Macy’s CFO, said that “promotional levels have been lower than historical levels” for the chain.
Katrina O’Connell at Gap said, “We’re already quite pleased with the fact that we’ve been able to really pull back on discounting in all of our brands.”
- Deloitte: Holiday Retail Sales Expected to Increase 7-9% – Deloitte
- Holiday Spending Reflects Continued Consumer Demand – National Retail Federation
- Online shopping bummer: Out-of-stock products surged 172% from pre-pandemic levels – CNN
- Shoppers Find Discounts Are in Short Supply This Holiday Season – The Wall Street Journal
DISCUSSION QUESTIONS: Do you expect reduced discounting to hold throughout the holiday season? Will promotional reductions set the stage for retailers, in general, to dial back the level of discounting they’ve done in the past as they move forward?