The holiday season is one of the most anticipated times of the year for retailers and shoppers alike. However, recent data suggests that major retailers such as Macy’s, Target, and Ulta Beauty are offering smaller discounts and fewer markdowns in the days leading up to Christmas. This shift in the retail landscape has raised concerns among consumers and analysts, who are analyzing the potential impacts on consumer spending and retailer profitability.
According to data from Centric Market Intelligence and Vertical Knowledge, retailers have decreased the number and size of their price markdowns on key products from November 1 to December 1. At Macy’s, products with price markdowns fell from 49% to 46%, while the average markdown dropped from 20% to 17%. Similarly, Ulta saw a decrease in products on sale from 10% to 5%, and the average discount dropped from 3% to 2%. This trend is also observed in other retailers such as Abercrombie & Fitch and Macy’s-owned Bloomingdale’s.
The Rationalization Behind the Decision
The decision to roll back discounts ahead of the Saturday before Christmas, known as “Super Saturday,” reflects the challenges retailers face amid higher interest rates and other financial pressures affecting consumer spending. While promotions have been crucial in attracting shoppers during key periods like Black Friday, cutting back on discounts in December is a strategy aimed at improving profitability. Furthermore, with the extension of Black Friday deals from October, retailers believe that price-sensitive shoppers have already completed their shopping, making the need for deep discounts less necessary.
Understanding Shopper Behavior
This year’s Super Saturday falling just two days before Christmas plays a significant role in consumer behavior. Shoppers who have procrastinated their holiday shopping are less concerned with cost and more focused on finding the perfect gift. Retailers recognize this shift in demand and see it as an opportunity to recover their profit margins by offering products at regular price levels.
According to the National Retail Federation trade group, U.S. retailers are expecting a 10% decline in shopper footfall compared to the previous year on Super Saturday. Chains like Best Buy and Home Depot have reported fewer store visits compared to the previous year, indicating a decrease in overall consumer spending. Early data from Circana suggests that sales revenue and unit sales during the 2023 holiday shopping season are also lower than last year, indicating a shift in consumer behavior.
Impact on Retailer Strategies
Retailers have spent the past year preparing for weaker holiday sales by reducing inventory and adjusting their orders accordingly. This proactive approach allows retailers to focus on boosting profit margins rather than relying solely on discounted prices to drive sales. Nike, for example, is offering fewer discounts this year compared to last year, with most discounts falling between 14% and 30% on its U.S. website. This shift in strategy aligns with the overall trend seen among major retailers.
As major retailers like Macy’s, Target, and Ulta Beauty offer smaller discounts and fewer markdowns in the days leading up to Christmas, the landscape of holiday shopping is undergoing a transformation. Retailers are rationalizing their decision based on consumer behavior and the need to improve profitability. While price-sensitive shoppers may have already completed their holiday shopping, retailers are now focusing on capturing the attention of last-minute shoppers who are less concerned with discounts. Only time will tell how this shift in strategy will impact both retailers and consumers in the long run.
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