Many deals advertised as the best for this holiday season could be causing harm instead of joy.
Holiday shopping in the midst of the ongoing pandemic shows signs of positivity, with increased celebrations and spending. However, retailers are finding fewer deals this season – a trend that was apparent during Black Friday and Cyber Monday.
Deals during these prominent sales events weren't as appealing as in previous years according to various reports. For instance, the average discount on Thanksgiving Day was 27%, down 7% from last year, while the average order value increased by 11%. From November 23 to November 25, the average selling price in the U.S. went up 22% compared to the same period the previous year1.
On Cyber Monday, BMO Capital Markets analysts found a decrease of about 600 basis points in the percentage of items on sale. However, they also noticed an approximately 15% increase in the number of sale SKUs (Stock Keeping Units) they were tracking compared to last year1.
A shift in promotional strategies among several brands was noted by analysts. Offenders of less promotional activity compared to the previous year included brands like Adidas, Steve Madden, Skechers, Timberland, North Face, Tommy Hilfiger, Ugg, and retailer Foot Locker. Among stores that offered fewer or shallower deals on Cyber Monday, analysts pointed to Nike, Bath & Body Works, American Eagle, and Nordstrom1.
Furthermore, overall promotional activity in November was found to be significantly lower than the previous year at 29 tracked retailers1 according to Deutsche Bank. Approximately 86% were "less or slightly less promotional," with 7% being "more or slightly more promotional," leaving a sum of 79% with less promotional activity1.
However, not all brands followed the new approach. Deep price cuts were seen at Gap, Macy's, Aritzia, Madewell, and other stores, potentially indicating that brands resorting to deeper price cuts might be struggling1.
The low promotional activity isn't without reasons. The global supply chain disruptions led to inventory shortages, increased costs, and brought limitations on the number of discounts retailers could offer2. Inflation and rising costs also played a role in reducing the number of promotions, as retailers aimed to protect their profit margins2. Lastly, pandemic-driven consumer behaviors, such as a shift towards essential purchases, influenced retailer strategies2.
The long-term implications for sales and profit margins include:* Maintained profit margins: By reducing discounts, retailers could preserve or boost their profit margins despite lower sales volumes.* Lower sales volumes: A more conservative discount approach could lead to lower sales volumes, especially if price-conscious consumers seek out more affordable alternatives.* Adjusted consumer behavior: Shoppers may adapt their habits, focusing more on essential items or looking for retailers that offer competitive pricing.
In conclusion, while a more conservative approach towards discounts might benefit retailers' profitability, it could also result in decreased sales volumes if consumers prioritize price over brand loyalty or product preference.
- Holiday shopping in the midst of the pandemic is showing signs of positivity, with increased celebrations and spending, but retailers are finding fewer deals this season, as seen during Black Friday and Cyber Monday.
- according to various reports, deals during these prominent sales events weren't as appealing as in previous years, with the average discount on Thanksgiving Day being 27%, down 7% from last year.
- On TV, financial analysts discussed the decrease in the percentage of items on sale during Cyber Monday, approximately 600 basis points, and an increase in the number of sale SKUs they were tracking compared to last year.
- In the environment of ongoing pandemic-driven consumer behaviors, retailers have had to adjust their promotional strategies, with some brands like Adidas, Tommy Hilfiger, and Foot Locker offering fewer or shallower deals on Cyber Monday.
- Analysts point out that the low promotional activity, noticed at 29 tracked retailers in November, may be due to global supply chain disruptions, inflation, rising costs, and a shift towards essential purchases.
- Retailers aiming to protect their profit margins during the pandemic-inflated costs have implemented a more conservative discount approach, which could have long-term implications for sales and profit margins – maintained profit margins, lower sales volumes, and adjusted consumer behavior focusing more on essential items or competitive pricing.
