Buyers say lack of holiday discounts has dampened spending


Zarah Reeves waits all year to shop for clothes, electronics, cosmetics, and dorm furniture, syncing her purchases with the big discounts so ubiquitous as the holidays approach.

But this season, brands that once cut prices 50 to 90 percent from Black Friday are sticking to “10, maybe 20 percent,” markdowns, she said. So the 20-year-old Howard University student buys less and even made a pact with her best friend to avoid Christmas presents altogether.

“The offers are just awful,” Reeves said. “I’m looking at these discounts thinking, is that it? Whatever.”

Growing discounts – which have long been an integral part of a retailer’s survival – are shrinking in the face of rising costs and supply chain challenges, leaving Americans without the big vacation cuts they want. expect. Prices are higher everywhere, even online, as businesses adopt more personalized strategies based on a buyer’s purchase history. Analysts and industry insiders say the change could become long term.

Clothing brand Express, cosmetics chain Ulta Beauty and big box retailer Dick’s Sporting Goods are among those who have withdrawn their promotions. Bath & Body Works, the mall mainstay known for its “buy 2, get 1 free” offers, is limiting sales and discounts throughout the store while increasing the prices of popular items like candles and flower warmers.

“We have been able to keep promotion levels at or below what we were in 2020 and significantly below what we were in 2019,” CEO Andrew Meslow said on a call to results last month.

This is a stark reversal from what consumers have been conditioned to in the dozen years since the Great Recession. Retailers ‘reliance on flashy promotions to attract shoppers quickly became a’ race to the bottom ‘, especially among mid-range brands who tried to outdo themselves with’ 40 % off everything, ”said Milton Pedraza, Managing Director of the Luxury Institute. , a consulting and research firm.

But now, nearly two years after the start of a pandemic that shook supply chains and made it harder for retailers to secure inventory quickly and cheaply, that is all about to change. Businesses “finally see an opportunity to raise prices,” he said. “Brands haven’t had a window like this in a long time, so they’re cutting back on any kind of promotion, discount or reward.”

Analysts say retailers have become more demanding about the types of products they brand and to what extent. This season’s discounts, which range from 5% to 25%, are well below the historical average of 10 to 30%, according to Impact Analytics and Cowen & Co. Many stores have “the lowest level of clearance products in five years or more. Cowen analysts wrote in a recent research note. At Macy’s, executives said industry promotions hit an “all-time low” in 2021.

“Consumers have become accustomed to bigger and bigger discounts, but as we come out of the pandemic you just don’t see those discounts anymore,” said Nela Richardson, chief economist at ADP. “The demand is so high that they are just not needed.”

The reduction comes at a time of sustained inflation. Overall prices have jumped 6.8% in the past year, according to Commerce Department data, and major consumer goods brands like Procter & Gamble and Mattel have recently increased their prices, citing higher costs. for materials and shipping. Meanwhile, e-commerce prices rose a record 3.5% from a year ago, according to Adobe’s digital price index.

Yet so far, consumers have continued to spend: Retail sales climbed 1.7% in October, even as Americans expressed concerns about escalating inflation. This momentum is expected to continue in November, when economists expect retail sales to rise another 1%. But there are growing signs that families are being affected by higher costs: 1 in 4 consumers said higher prices eroded their standard of living in November, according to the Consumer Sentiment Index of the University of Michigan.

In Philadelphia, Harold Hawk says shopping for his six grandchildren has become “a disaster.” The PlayStation 5 that his grandson wanted since last Christmas is still out of stock. He was considering a new hat from the Saint Josephs University bookstore for himself and his grandchildren, but the only promotion offered is free shipping on purchases of $ 75, he said.

“Over the past few years, they were enjoying big discounts,” said Hawk, 70, a retired private investigator. But this year, “everything seems overpriced”.

GridPlus, an Austin-based maker that sells $ 400 cryptocurrency hardware wallets, has removed all holiday discounts this year. Shipping costs have increased tenfold since 2020 and the wait for new products has dropped from a few weeks to six months. As a result, the company claims it does not have enough products to cope with an order boom.

“We know we’re going to sell no matter what,” COO Justin Leroux said.

It remains to be seen whether dropping general discounts – such as 20% off everything – will become a long-term strategy, analysts say. But many expect to see more personalized offers, based on the consumer’s purchase history.

“To a certain extent, the promotions will come back,” Adrian Mitchell, Macy’s chief financial officer, said this month at Morgan Stanley’s global retail conference. “But we believe there is a more permanent shift from deep, broad promotions to much more personalized promotions using data science, which is just a lot more profitable for our business.”

Analysts say shoppers have generally cut back on impulse buying during the pandemic, instead spending on expensive, targeted items like household furniture, home appliances and sports equipment. A recent surge in online shopping has also given retailers a better understanding of who their consumers are – and how to reach them – than ever before, says Christina Boni, retail analyst for Moody’s.

“As a result, they can offer more targeted discounts,” she said. “If they know you have three children, they can send you a back-to-school coupon that will motivate you to come. And if they know I love golf, why not send me a golf promotion? They can have me walk into the store without putting all the golf goods on sale. “

Still, sales plummeted during the five-day Black Friday weekend. Shoppers spent an average of $ 301 on holiday shopping between Thanksgiving Day and Cyber ​​Monday, down 3.5% from last year, according to the National Retail Federation.

In the meantime, many consumers say the lack of big discounts has made them more deliberate. Some forgo impulse buying and put off non-necessities like big-screen TVs and new sneakers until they find deals they deem attractive.

According to the National Retail Federation, Americans are expected to spend an average of $ 648 on gifts this holiday season, less than they did in the previous two years. The trade group predicts that overall vacation spending will rise by as much as 10.5% to a record $ 859 billion this year, although economists say at least some of those gains will be the result of higher prices. .

Thai Fong, an actor from Los Angeles, visited the local mall on Black Friday as he always does. But unlike in previous years, when he left with armfuls of bags, he only bought two things: an Adidas T-shirt and boxers at the Gap.

“It was pretty amazing how bad the deals were,” said the 37-year-old. “I kept thinking, am I going crazy?” Before, things were at 70%, 80% off. And now the best you can get is 30% off – which I mean 30% is good, but it’s nothing special. “


About Author

Comments are closed.