The last week has seen retailers begin to push "the promotional panic button" as holiday sales are expected to collapse to the weakest since 2009 (as we discussed here [5], here [6], and here [7]). As Bloomberg reports [8], faced with wary shoppers and a shorter holiday season, retailers are piling on deals as they jockey for market share and are faced with "too much inventory, which doesn't bode well for 2014." U.S. retail sales excluding autos and gasoline grew 0.2% in October, half the month-earlier gain leaving this year likely to be the worst and most promotional shopping season since 2008 and perhaps Wal-Mart's $98 32-inch flat-screen TV is just the start of the deflationary spiral that benefits the stagnant incomes of the middle-class.
Via Bloomberg, [8]
U.S. retailers are discounting earlier than ever as they brace for the weakest holiday shopping season since 2009.
Wal-Mart Stores Inc. (WMT) is dangling a 32-inch flat-screen TV for $98, down from $148 last year. Sears Holdings Corp. has waived layaway fees and its Kmart chain is introducing a rent-to-own program. More than a dozen retailers are opening earlier, or for the first time, on Thanksgiving Day. Among the attention-grabbing stunts: a $1 million jackpot for one of the first shoppers to visit Gap Inc. (GPS)’s Old Navy chain on Black Friday.
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For the fourth year in a row, disposable incomes in 2013 have only inched up.
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“The consumer is more deal-driven than ever,” Ken Perkins, president of researcher Retail Metrics LLC, wrote in a Nov. 14 note. “Discretionary dollars for holiday spending are limited for the large pool of lower- and moderate-income consumers due to lack of wage gains this year coupled with the increased payroll tax.”
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“We will be seeing promotions significantly above the current 30 percent off, which are the opening table stakes,” said Craig Johnson, president of Customer Growth Partners, a New Canaan, Connecticut-based consulting firm. Stores have too much inventory, which “doesn’t bode well for 2014.”
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The earlier openings are no panacea because they’ll simply pull purchases forward, rather than driving incremental sales, said Pam Goodfellow, a director at Prosper Insights & Analytics, a Worthington, Ohio-based research firm.
“Once they have spent their money, it is hard to coax them back out into the stores,” she said.