As the countdown to Christmas draws closer, last-minute shoppers hoping to score some major discounts may be in for a bit of disappointment. According to an analyst and two datasets measuring recent prices from major retailers like Macy’s, Target, and Ulta Beauty, there seems to be a noticeable decrease in both the number and size of price markdowns compared to previous years [1].
Data analytics firm Centric Market Intelligence (formerly StyleSage) conducted an analysis of retailers, brands, online trends, and products, revealing that Macy’s experienced a drop in the percentage of products with price markdowns from 49% to 46%, while the average markdown decreased from 20% to 17% from November 1 to December 1. Similarly, Ulta saw a decline in products on sale from 10% to 5% and a decrease in the average discount from 3% to 2% within the same time period [1].
Another data analytics firm, Vertical Knowledge, examined pricing and discounts across retailers’ websites. They found that retailers like Abercrombie & Fitch and Macy’s-owned Bloomingdale’s also reduced or maintained their average discounts on products from November to December, following a trend of deepening markdowns seen in previous years [1].
Facing challenges like higher interest rates and other financial pressures that continue to affect consumer spending, retailers may be adjusting their discounts as a way to entice price-sensitive shoppers in the final days before Christmas. However, this year’s promotions haven’t been as deep, indicating a shift in the retail landscape [1].
While promotions have proven to be crucial in attracting shoppers during key periods like Black Friday and back-to-school season, cutting back on discounts in December can help retailers improve their profits. This is especially true considering that many retailers began offering Black Friday discounts as early as October this year. The president of YCG Investments, Brian Yacktman, suggests that the most price-sensitive shoppers have likely already completed their shopping, leaving room for retailers to recover their margins [1].
This year, “Super Saturday” falls just two days before Christmas, known as one of the busiest shopping days of the year. However, retailers are projecting a 10% decline in the number of shoppers compared to last year, indicating a potential decrease in demand. Additionally, store visits in recent days have been lower than the previous year for chains like Best Buy and Home Depot [1].
Procrastinating shoppers who are less concerned about cost are willing to pay a premium to secure their desired gifts. This creates an opportunity for retailers to recover their profit margins [1].
The decrease in sales revenue (6%) and unit sales (5%) during this year’s holiday shopping season, as reported by early data from Circana, further confirms the changing landscape of consumer behavior. Shoppers are buying less overall, and this could explain why some individuals, like pharmacist Ben Gibson from San Antonio, Texas, are comparing prices online before making a purchase. Others, like Stacey Powells from Mammoth Lakes, California, have struggled to find compelling prices on gifts for their loved ones [1].
Leading up to the holiday season, retailers have been taking steps to clear out excess inventory and reduce orders to anticipate weaker sales. This strategic move allows them to focus more on boosting profit margins rather than relying on convincing consumers to splurge during a time of inflation concerns. Nike, for example, is offering fewer discounts this year compared to last year, indicating a shift in their pricing strategy in the face of changing market dynamics [1].
As the holiday season reaches its climax, retailers are adjusting their discount strategies to align with evolving consumer behavior and market dynamics. The decrease in both the number and size of price markdowns indicates a shift towards prioritizing profit margins. While Super Saturday may see fewer shoppers overall, the procrastinating consumers who are less price-sensitive present an opportunity for retailers to recover their margins. Ultimately, retailers are navigating the challenges of a promotional environment while searching for new strategies to drive sales and profits during the busiest shopping season of the year.
[1] Katherine Masters. (2023, December 23). Last-minute shoppers see smaller discounts, fewer markdowns at major U.S. retailers. Retrieved from https://www.reuters.com/business/last-minute-shoppers-see-smaller-discounts-fewer-markdowns-major-us-retailers-2023-12-23/.