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Big discounts mean high pressure on retailers

by SuperiorInvest

Shoppers walk past a sale sign as Black Friday sales begin at The Outlet Shoppes of the Bluegrass in Simpsonville, Kentucky, November 26, 2021.

Jon Cherry | Reuters

Major retailers are under intense pressure to deliver on Black Friday after several reported a slowdown in sales heading into the holiday shopping season.

Macy’s, target, Kohl’s, Gap and Nordstrom he talked about a sales shutdown at the turn of October and November. target lowered its outlook for the holiday quarter and Kohl’s withdrew his prediction citing slow sales. Macy’s CEO Jeff Gennette said shoppers were still visiting its stores and website during the lull, but browsing wasn’t turning into purchases. Best buy Chief executive Corie Barry said shoppers were showing more interest in the sale than usual.

These results illustrate an emerging theme this season: Shoppers are waiting for the biggest and best deals — especially as inflation hits their wallets.

“People are willing to wait and be patient,” said Rob Garf, vice president and general manager of retail at Salesforce, a software company that also tracks shopping trends. “The discount chicken game is back and consumers will win in the end.”

This big appetite for deals is fueling higher expectations for a bigger Black Friday weekend. Many major retailers, including Walmart and Target, will remain closed on Thanksgiving Day. Still, a record 166.3 million people are expected to shop during the Thursday-Cyber ​​Monday weekend, according to the annual survey by the National Retail Federation and Prosper Insights & Analytics.

That’s up nearly 8 million people from a year ago and the highest estimate since the NRF began tracking data in 2017.

Consumers are choosing more about how they spend

Retailers and industry watchers they expect a more subdued holiday season with sales driven by higher prices rather than huge appetite for the goods. The National Retail Federation predicts increase in sales by 6 to 8%, including a rise from near-record high levels of inflation.

Travel and experiences are competing harder for Americans’ wallets, also because Covid-19 is about fade.

Retail executives who reported earnings talked about a shift back to pre-pandemic gift-buying styles. In the past two years, consumers have shopped earlier and expanded gift purchases due to concerns about delivery delays and stockouts caused by a surge in online sales and congested ports.

This year, retailers once again started their sales early – but channeled them towards selling excess inventory and catering to the value-minded consumer. Amazon held a second Prime Day-like sale in October, and Target and Walmart had competing sales around the same time.

Shop strategically

So far, however, there have been shoppers no rush to buy.

Barry, Best Buy’s CEO, said the company’s October sales were the slowest of the quarter compared to last year. She said the backdrop is very different from a year ago, when shoppers bought early and worried they wouldn’t get all the items on their wish list.

“That impulse to buy just isn’t there this year,” she said. “Your average consumer knows there’s a lot of inventory out there and it’s going to be competitively priced.”

She said Best Buy now expects customers to spend more during Black Friday, Cyber ​​Monday and the two weeks before Christmas. The company has extended hours, staffed stores and even timed inventory for the plan, she said.

Not only do you have money for travel and entertainment, but also for necessities.

Chris Horvers

JPMorgan analyst

In late October and November, other factors may have dampened demand. At recent earnings calls, executives at Gap and Nordstrom cited unseasonably warm fall weather that may have inspired consumers to take their time in stores to buy winter coats or heavy sweaters.

In addition, some Americans were gearing up for midterm elections — highly contested races that have captured their attention and may also have contributed to economic uncertainty, said Chris Horvers, an equity research analyst who covers retail for JPMorgan.

But he added that the weaker start to the holiday season also raised some alarms about consumer health. Retailers were cautious in sharing hopes for the season — and hinted at consumers dipping into savings accounts and increasing credit card balances despite posting better-than-worried third-quarter results.

“Not only do the dollars shift to travel and entertainment,” Horvers said, “you also have money for necessities.”

Plus, he said it’s not all good news when people show up for Black Friday weekend.

“If a consumer responds to promotions and buys this week, but stops spending shortly afterwards, it reinforces concerns that retailers already have that the consumer only buys in a pinch and only buys when there’s a discount.”

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