Holiday shopping is a behemoth to reckon with. Between the many holidays for gifting between November and December, it is one of the busiest times of year for retailers. From Black Friday to the day before Christmas, retailers expect peak holiday traffic, and all our hoping to end their Q4 and fiscal years on a high note after the holiday season.
This season, retailers have a force to reckon with aside from frenzied shoppers though: inflation. Inflation is squeezing shoppers’ wallets, leaving them with less disposable income. In the wake of concerns over how inflation will affect holiday shopping, retailers are likely to engage in more promotions to try and stay in the black amid inflation.
As retailers try to relieve their excess inventories, the holiday season is seen as a prime time to do so. Slashing prices on apparel, television, and furniture are seen as a big attraction for customers. Saving now is more important than ever as we are in a recession, and discounts are a major way to attract customers.
During the global COVID-19 pandemic, retailers finally had a chance to escape from the promotional pricing and discounting cycle. Now, promotional pricing and discounts are a saving grace for retailers. Consumers had grown accustomed to the idea that things would cost more due to supply chain issues after the pandemic, and they were conditioned to pay higher prices and full price on items.
While supply chain issues are still rampant in retail, retailers are now holding excess inventory. In efforts to keep shelves stocked, they were overbuying. Although this recession is unique in that people are still spending money, it’s hard for buyers to predict what shoppers will want ahead of time. Not only are promotions and discounts expected on new season products as part of holiday shopping, but retailers will use this as an opportunity to do their best to purge excess inventory from earlier this year with steep discounts.
Retailers turn to discounting to rid themselves of inventory
According to a recent article by The Wall Street Journal, retailers including Macy’s Inc., Walmart, and Target are all facing pressure from consumers to further markdowns. These retailers all miscalculated customer demand and did use markdowns to relieve themselves of excess stock.
The article also went on to state that in August 2022, within the apparel and footwear industry, available discounts increased by 1.43 percentage points, compared with a 3.29 percentage point decline a year earlier. In August, the average discount at apparel and footwear retailers was 16 percent up from 15 percent a year earlier.
Even as early as July, CBS News described the current state of overstocked inventory as a “retail Armageddon,” with deep discounts happening as early as the summer. The article went on to state that stores are overstocked by more than 30 percent and there’s a lack of storage for all the excess inventory. CBS even reported that some retailers are so desperate not to have excess inventory, if customers are doing returns, they will refund their money and tell them to keep the item.
While inflation is pinching pockets, consumers at least have great sales to look forward to his holiday season. Let the discount extravaganza begin.