Reduction in Discounts at Major Retailers
Last-minute Christmas shoppers searching for eleventh-hour deals may be disappointed as major retailers such as Macy’s, Target, and Ulta Beauty have scaled back their discounts and reduced the number of items on sale, according to a retail analyst and data from Centric Market Intelligence and Vertical Knowledge. While these retailers intensified their promotions for Black Friday, they have since curtailed the size and quantity of their price markdowns. For instance, at Macy’s, the percentage of products with price reductions declined from 49% to 46%, and the average markdown decreased from 20% to 17%. Similarly, Ulta witnessed a drop from 10% to 5% in products on sale, with the average discount decreasing from 3% to 2%.
Changes in Retailers’ Discount Strategy
Vertical Knowledge, a data analytics firm, reported that retailers such as Abercrombie & Fitch and Bloomingdale’s (under Macy’s ownership) have either maintained or diminished their average discounts on products compared to the previous year. Notably, this holiday season has seen less aggressive promotional pricing, despite being characterized by a high level of competition. Jessica Ramirez, a senior research analyst for Jane Hali & Associates, noted that even though the current retail climate is heavily focused on promotions, the discounts have not been as substantial. This shift in discounting strategies suggests a concerted effort by retailers to improve profit margins, especially considering the earlier-than-usual commencement of Black Friday sales, which began in October for many brands.
Challenges for Retailers
The decision to reduce discounts leading up to “Super Saturday,” traditionally one of the busiest shopping days of the year occurring shortly before Christmas, reflects the challenges faced by retailers amidst higher interest rates and financial constraints that have caused a decline in consumer spending. However, scaling back on discounts during December serves as a means to boost profits. Brian Yacktman, president of YCG Investments, stated that price-sensitive shoppers have likely already completed their holiday shopping, and with Super Saturday falling just two days before Christmas, last-minute buyers are less likely to prioritize cost when making purchases. The National Retail Federation trade group anticipates a 10% drop in the number of shoppers on Super Saturday compared to the previous year, while store visits at Best Buy and Home Depot have declined in recent days.
Overall Decrease in Sales and Unit Volume
Preliminary data from Circana reveals a 6% decrease in sales revenue and a 5% decline in unit sales during this year’s holiday shopping season compared to the previous year. This decline suggests that shoppers, in general, are purchasing fewer items. For example, Ben Gibson, a pharmacist in San Antonio, Texas, mentioned that he was comparing prices for video cameras and tripods at Walmart and Best Buy. Nike, among other retailers, has also reduced the number of discounts available this year. In contrast to last year’s advertised discounts of up to 50% off last-minute gifts, most discounts on Nike’s U.S. website during this period ranged from 14% to 30%. This indicates a shift from heavy discounts to more modest promotions, including a 24% discount on women’s leggings from its higher-priced Zenvy line, normally priced at $100 or more.