Thus far, it’s been a fairly meh holiday season for retailers, with extraordinarily price-sensitive consumers holding off on making purchases unless an amazing deal is staring them in the face.
It’s been an especially competitive shopping season for retailers. The autumn federal government shut down, stagnant wages among the middle class, and continued economic uncertainty have all pushed shoppers to scale back on holiday purchases. The other major factor causing consumers to hold off on hog wild holiday shopping expeditions comes largely the result of retailers’ own tactics: After years of dramatic discounting throughout the two-plus months before Christmas, shoppers have been conditioned to wait to buy until they see amazing, can’t-pass-up deals.
So while shoppers came out in full force to crowd the malls over Black Friday weekend, average spending declined because of shoppers’ reticence to open their wallets, and because when they did spend, it tended to be when prices were super low. In many cases, the hottest-selling merchandise weren’t big-ticket items but cheap goods with marginal (or no) profits for stores, like the bath towels at Walmart selling for 29¢ apiece.
The main hope retailers still have is that consumer spending suddenly kicks into high gear during the final two weeks before Christmas. Yet the results of a new survey indicate that’s probably not going to happen—because an unusually high percentage of consumers is already done with their holiday shopping.
According to the poll, from America’s Research Group and Inmar, 30.8% of consumers say they are already done, or 90% done, with their holiday shopping. That’s the highest portion reporting to be done with shopping this early in the season in at least a decade. In 2008, the next highest year for consumers being done (or nearly done) with holiday spending by the first week of December, 25.3% said they were finished with at least 90% of their holiday purchases at this time of year.
What’s more, those who still have shopping to do tend to be waiting for especially good deals: 45% say they’re holding off until they see markdowns of at least 70% off. These are the folks who have been through this all before, and are sitting back, waiting for prices to inevitably fall. More so than ever, they understand that in this game of chicken—with consumers waiting for deep discounting and stores trying to avoid giving away the store—it’s shoppers who are in the driver’s seat of late. Today’s shoppers are well aware that retailers, facing a glut of inventory, are bound to resort to panic sales as the end of the year nears. If shoppers don’t get the prices and selection they want in stores, they’re well practiced at turning to the web—which is why online sales have continued to rise like gangbusters.
Retailers don’t even seem to be able to rely on American’s wealthiest consumers to spend like wild this season. While stores understandably hope to attract customers with the most money, Bloomberg News reports that overall, high earners are also holding back during the current holiday season. “They’re very restrained and feeling very uncertain about their personal prospects and the economy at large,” explained Pam Danziger, president at Unity Marketing, which earlier this year released a poll indicating that 85% of affluent shoppers would be spending less or the same on holiday purchases as they did last year.
Given the reality right now—with more consumers nearly done with holiday shopping compared to the past, and with stores still eager to boost sales—it seems like retailers have no choice but to give customers the last-minute discounts they’ve come to expect. There will certainly be plenty of shopping taking place in the weeks ahead. It’s just yet to be determined whether retailers or shoppers will be more pleased with the final prices in these transactions.
Why the Next Few Weeks Will Be a Bargain Shopper’s Dream
After a lackluster Black Friday weekend at the mall, there is extra pressure on retailers to goose sales during the particularly brief and intense period before Christmas 2013.
Leading into the big Thanksgiving-Black Friday shopping weekend of 2013, in addition to rumors about discounts and speculation about which gadgets and toys would be hot sellers, there was a lot of talk about the calendar. Specifically, the discussion centered on how Thanksgiving is celebrated particularly late in November this year, meaning that there would be only four shopping weekends (not five as usual) between Thanksgiving and Christmas.
Some have been worried that a shortened shopping season will translate into less overall spending by consumers. More likely, however, is that the quirks of the 2013 calendar mean that shopping efforts will simply be concentrated into fewer days. “Some years there are more or less shopping days, and sometime there are additional shopping Saturdays, but that doesn’t make much difference,” John Talbott, associate director of Indiana University’s Center for Education and Research in Retailing, explained to the Baltimore Sun. “The season is going to be what it’s going to be in terms of economic capacity.”
Erik Karson, a marketing professor at the Villanova University School of Business, agreed with that assessment in a recent phone interview. “Have you ever heard someone say they cut back on their spending because they had a little less time to go shopping one year?” he said. “That’s silly. People are going to spend what they’re going to spend. They’ll just do it quicker.”
While the calendar cannot be blamed (or credited) for retail sales totals being bad or good in a given year, the 2013 calendar seems to be impacting the retail scene in one key way: With fewer days for shopping, “every day counts a bit more for retailers,” said Karson. “If sales aren’t going well for few days, that’s a really big problem.”
In what’s been described as an especially desperate and competitive season for retailers, the shortened period between Black Friday and Christmas 2013 puts more pressure on stores than usual to produce sales each and every day. And now that it looks like consumers cut back on spending during the Black Friday weekend, retailers will feel even more under the gun to unload inventory and boost sales with Christmas just three scant weeks ahead.
For shoppers hunting for bargains, this scenario could be a bonanza. “There will be some panic sales,” Poonam Goyal, an analyst for Bloomberg Industries, predicted to Bloomberg News. “Retailers didn’t get what they wanted from Black Friday and they will need to make it up in the next three weeks.”
One of the most commonly used words to describe shoppers this season is “cautious.” Consumers are holding back on spending due to a wide range of factors, including stagnant wages, the lingering effects of the Great Recession and, more recently, the federal shutdown, and a general lack of confidence in the economy. Some shoppers are also getting wiser concerning the pricing strategies and marketing games played by retailers that entice them to buy impulsively in stores. One of the trends noted this year has been the rise of “webrooming,” in which shoppers research goods thoroughly online before heading to a store on an express mission to make the purchase—at exactly the price desired, without the possibility of being talked into buying something else by a store staffer.
In fact, retail analysts cited in the Bloomberg story note an increase in “mission shopping,” in which the consumer visits a store to buy one specific item and leaves without browsing—and without remotely entertaining the possibility of impulse buys. When this happens, it’s bad news for retailers, who rely on customers filling shopping carts with goods they hadn’t planned on buying.
Retailers don’t want to be left with tons of unsold merchandise when the holiday season ends, so when sales underwhelm at the start of the season, they typically resort to steep discounts to move goods. (Remember what happened last year to the Target-Neiman Marcus collection, which failed to generate interest with shoppers and wound up marked down by 70%?) Because the 2013 shopping season is shorter and more intense than usual, and because stores didn’t have gangbuster sales on the Black Friday weekend, retailers are likely to feel the panic setting in. For shoppers, this means that stores are apt to push discounts that are bigger and that appear earlier compared to most years.