Buyers Find Discounts Few This Holiday Season

A side effect of the Covid-19 pandemic as the holidays approach: less bargains for shoppers.

Industry executives and analysts say consumers should expect to pay closer to full price on a range of products this holiday season, including Nike sneakers, Coach handbags and Ralph polo shirts. Lauren.

Several factors are behind the paucity of deals, including safeguarded supply chains, inflation and moves by retailers to price their products more efficiently, according to executives and analysts.

For retailers, the new pricing power, after years of widespread discounts and deflation, is boosting profits at a time when sales are still recovering from the pandemic. It also makes some customers think twice about their holiday shopping plans.

“I will definitely be buying less this year,” said Michelle Keldgord, who lives in Redlands, Calif. “Every time I go to the store the prices are higher, which cuts the budget.”

The 28-year-old blogger said she plans to take her two children to Disneyland for Christmas this year instead of buying presents because she struggled to find the items on her list. They include a Lego Friends set for her daughter and the Fortnite Battle Bus for her son, as well as dresses, jeans and pajamas.

The number of online out-of-stock messages is up 172% from January 2020, according to Adobe Inc., which tracks visits to retail websites and product categories. Of the 18 categories Adobe tracks, clothing currently has the highest levels of out-of-stock, followed by sporting goods, baby products, and electronics.

Adobe expects holiday discounts of 5-25%, below the historical range of 10-30%.

“This year’s promotional levels have been below historical levels, and we’ve been thinking about which categories require promotion,” Adrian Mitchell, CFO of Macy’s Inc., told investors in September.

At the same investor conference, Katrina O’Connell, CFO of Gap Inc., said, “We are already very happy with the fact that we have been able to really reduce discounts across all of our brands. “

Retailers also withheld discounts last year, as shortages caused by the pandemic led many chains to jump into the season with less inventory. At the same time, shoppers, some of whom are wary of Covid-19, were more likely to buy when they made the effort to walk into a store.

Before the pandemic, many retailers were increasing the discounts offered during the holiday season almost every year, causing customers to wait for the offers before buying. For some chains such as Gap and Home Depot Inc., the effort to wean shoppers off the discounts had been a long battle.

The Home Depot has moved away from promotional pricing for years, executives said, and the pandemic has aided those efforts. But he’s struggled to break with tradition with items like home appliances which for decades have been priced high or low, depending on sales, chief executive Craig Menear told a conference. analysts in September.

Executives of big box retailers, including Walmart Inc., Costco Wholesale Corp. and Home Depot, said they would like to have more inventory to sell, but the lack of adequate supply is helping to reduce discounts.

Walmart’s inventory level has risen from 2020, chief executive Doug McMillon said at an analyst conference in September. “We would do even more inventory if we could get it, especially in certain categories,” he said.

The average discount percentage on men’s clothing purchased over the Labor Day weekend through Brad’s Deals, an online discount marketplace, was 54% this year, up from 71% a year ago. For shoes, discounts have fallen to 51% this year, down from 62% last year. And sports, fitness and camping equipment has been cut by an average of 31% this year, down from 50% last year. Each of these categories was also less promotional this year compared to 2019.

Bargains for women’s clothing increased, while those for electronics and housewares were at about the same level as in the past two years.

Brad’s Deals editor-in-chief Casey Runyan said overall she expects the reduction in discounts to persist through the holiday season. “Promotions will likely be strategically placed on products that retailers have in excess stock,” she said. “These items may not be at the top of buyers’ holiday wish lists.”

BMO Capital Markets analyst Simeon Siegel said there would be a dichotomy in the discount this year. “Buyers will have to spend on hot items, but will find deals on leftover items,” Siegel said. He expects discounts to be more frequent on seasonal items that arrive late to stores or warehouses due to the backlog at ports.

In the first few weeks of October, the percentage of items on sale across a handful of brands he tracks fell 5% from the same time last year. Nike and Adidas products sold at Foot Locker saw the biggest reduction in promotions, with discounts roughly 30% lower at both brands. Coach, Ralph Lauren and Michael Kors items sold at Macy’s also had lower discount rates.

While supply chain disruptions are the main reason for product shortages, some brands have taken steps before and during the pandemic to more strategically price items, by reducing the amount of product they sell, or by using data to better target promotions to certain customers.

“We were ineffective in the way we promoted before,” Chip Bergh, CEO of Levi Strauss & Co., told The Wall Street Journal’s Tech Live conference last week.

Mr Mitchell, chief financial officer of Macy’s, told analysts in August that the company was using more scientific data to set prices. This has helped him reduce and simplify the depth of his promotions, he said. Mr. Mitchell added that reduced inventory levels help the chain to maximize the amount of merchandise it sells at full price.

What is good for retailers is not necessarily good for consumers.

Ryan Zamo is a bargain hunter. But the 32-year-old owner of an organic skin care company said she didn’t find many deals this year. “Even if there is a sale, everything you want is either out of stock or out of stock,” the Los Angeles resident said.

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