Retailers offering earlier discounts as consumer shopping habits change
By Andy Kriege, YSN
Black Friday proper is still more than six weeks away, but many retailers are already rolling out their doorbuster deals. Could Christmas in July be far off?
According to an Oct. 10 report in The Wall Street Journal, retailers who are heavy on inventory are getting a head start on the holiday season’s traditional Thanksgiving weekend kickoff, most notably Target and Walmart.
Last week Target said it is extending the discount season with seven weeks of Black Friday deals, three weeks more than last year, including discounts of up to 50% or more on toys, games, electronics and countertop appliances. CEO Brian Cornell told investors as early as last summer that with consumer spending slowing and inflation rising, the company was canceling orders and initiating aggressive markdowns to move excess goods.
For its part, Walmart began its Black Friday sales events last week to lure holiday shoppers.
Besides getting a jumpstart on holiday sales, the moves by both discounters were also seen as an effort to counter last week’s 48-hour “Prime Early Access Sale” by Amazon, its second this year following its traditional Prime Day promotional event last summer.
Analysts said Amazon’s attempt to get a jump on the holiday season didn’t deliver the same revenue boost as prior Prime Days. Klover, a company that analyzes real-time commerce and financial data, found that households spent around 40% less during last week’s event compared with the Prime Day sale in July.
The slowdown in retail sales was also reflected in the U.S. Commerce Department’s September sell-through figures, released last Friday. Total retail sales excluding gasoline and autos were essentially stagnant from August, up just 0.3% month over month, while spending at electronics and appliance stores declined 0.8% and furniture stores sales slipped 0.7% — a sign that spending on durable goods like refrigerators and sofas was beginning to sag.
The Journal noted that retailers have been overwhelmed with excess inventory this year as shoppers changed their spending habits and supply lines reopened. During the pandemic consumers tapped their savings and stimulus checks to buy new furniture and appliances as they hunkered down and shied away from away from out-of-home experiences. But spending patterns have since shifted, with more people now seeking services like travel and entertainment.
Adding to the inventory woes: supply chain constraints are easing and aggressive purchasing early in the year has resulted in many retail warehouses busting at the seams with excess merchandise.
Analysts at Morgan Stanley project that retail profits will decline as merchants look to cut prices faster than their competitors in a “a race to the bottom.” But stores face a double-edged sword. “If retailers don’t offer aggressive discounts,” the investment firm said, “they risk paying high costs to hold excess inventory.”
Causing further pain is the crushing inflation that remains close to a four-decade high. The rising price of goods is squeezing consumers and forcing them to rethink what they are willing to spend on discretionary purchases. Merchants are responding by bringing back more bargains, cheaper store brands and more aggressive discounts as consumers feel the pinch.
At Walmart and Target, customers are now choosing more store-branded items. These private-label products are produced exclusively for their own shelves and are usually offered at lower prices for shoppers while delivering higher profit margins to the retailers.
Retailers are also leveraging their online stores in a continuation of a multi-channel trend that accelerated during the pandemic. This has been a boon to Black Friday shoppers who can now avoid the crowds and pre-dawn starts of traditional brick-and-mortar doorbuster deals and shop the sales from home.