Retailers had cut back significantly on inventories heading into the fall season knowing ahead of time that while the weather might get brisk, business was going to be anything but.
But as prepared as they may have thought they were, many retailers were caught completely off guard as sales went from expectedly bad to whole lot worse. Reduced inventory levels still left way too much stock on the floor and in back rooms as double-digit declines hit home in September and October.
The end result, a recent New York Times (NYT) report pointed out, is that many stores are left with trying to move out fall merchandise as Christmas merchandise is being delivered.
"I've never seen as many 'percent off the entire store' promotions as we're seeing right now," said Kimberly Greenberger, a retail analyst at Citigroup. "What we're hearing anecdotally from different retailers is that when they're putting something on sale at 30 or 40 percent discount it is no longer having an effect on consumers. They're having to cut prices 50 to 60 percent to get consumers interested."
Ms. Greenberger told the NYT that retail chains including American Eagle, Ann Taylor, Bath & Body Works, Chico's, Gap, J. Jill, Talbots and Victoria's Secret, have cut prices on their entire lines and, in some cases, offered 'buy one and get another half off' deals.
While it is important for retailers to move merchandise, the type of discounting being practiced now could have serious negative consequences, according to some.
Marshall Cohen, chief industry analyst for the NPD Group, said retailers normally expect to discount about a quarter of store merchandise. By expanding the amount of items on sale, he said, stores risk running out-of-stock on popular items early into the holiday selling season.
"What's happening is the retailer is almost saying, 'Please just come in. We'll pay you to shop,'" he said.
Discussion Questions: How bad was the fall season's inventory story for retailers? Are merchants in danger of discounting themselves out of business this holiday season? Is there a better way to deal with excess inventory going into the holiday season?