Sticker shock could change retailers’ approach to sales
Macy’s Black Friday Specials for Maumee (Ohio), November 27, 2020.
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Keith Fitzgerald went to great lengths to ensure he received the best gift this holiday season.
Fitzgerald, a 40 year-old hairdresser, sought out a limited edition Lego in both online and offline stores. a nearly 4,000-piece set that resembles the house in the Christmas classic, “Home Alone” — complete with booby traps and a zipline to the backyard treehouse. On the last night in Hanukkah, he knew that the set of $250 would be a delight for his girlfriend.
However, the Lego set was out of stock when he visited the website. The set was not available in any of the nearby Lego stores. The friend reached out to him through family and friends all over the country, and bought the item for him at New York City’s store. He also agreed to send the huge box to his house in Richmond, Virginia.
Fitzgerald stated, “The shipping is a bit more, but it’s well worth it.”
The holiday season is proving to be a challenging one due to the consumer’s desire for spending and the worldwide supply chain crisis. That means that some of the most sought-after toys, clothes, and other merchandise are difficult to find, even when retailers such as WalmartAnd TargetThey expect there to be lots of merchandise on the shelves. The increase in prices is also boosting motivation for shoppers, who once relied on deals to motivate them.
Adobe Analytics tracks the websites of retailers and predicts that U.S. customers will experience smaller discounts for all major gift categories. For electronics, 22% discount is expected during holidays, compared to 27% in 2020. Toy discounts will reach 16%, compared to 19% last year. According to the company, apparel prices will rise by 15% rather than 20% in 2020.
Adobe says that shoppers can still get the greatest discounts during key holiday shopping holidays such as Thanksgiving, Black Friday and Cyber Tuesday. These prices won’t go as low though. Adobe stated that shoppers are likely to pay 9.9% more for Cyber Week than they did a year ago.
Retailers have been able to gain an advantage because they are able to meet consumer demand and stock some products at a low level. The shares of Macy’sAnd Kohl’sThe retailers’ quarterly results showed that they had benefited from low inventory levels and significant markdowns.
Leaders of department stores stated that they were able to report third quarter earnings. pass on higher costs from shipping and cut back on huge price cutsWhen selling clothing, shoes, and other home goods. Also, fewer items end up on clearance racks in department stores. This is leading to higher profits.
Luc Wathieu of Georgetown University’s McDonough School of Business is a professor of Marketing and says that there’s no need for retailers to offer holiday discounts. He said that it would be foolish for retailers to offer discounts like this. Fear of not finding a much-wanted item is enough motivation for people to rush to the store or a retailer’s website — and to get them to pay more.
He stated that retail stores no longer need messages to customers in the same fashion as they do with sales.
He said that they told them “Look, the toy your child wants may not be available later.” “‘Shop early. Do not buy for discounts. “You’re lucky that it’s available on the shelf.”
A shift from drastically lowering prices to compete head-to-head against competitors could be a good opportunity for retailers. Katie Thomas is the lead at Kearney Consumer Institute. Companies can reduce the cost of shipping and materials, and there will be fewer clearance items.
She said that it might be a way to help retrain American shoppers, who are long-term enticed by deals.
“Other Countries don’t discount as much as we do,” she stated. We’ve taught American consumers how to wait until everything is on sale.
It could lead to a significant increase in profits and operating margins for businesses.
Retailers can use this information to learn and test how to set prices appropriately, or make a statement in other ways. Direct-to-consumer businesses, like Everlane and Away, don’t discount, but instead tout the exclusive products and customer service. Some like AppleYou have such an avid fan base that you will be waiting in long lines just to get your item for full price.
She stated, “I view it from the simple consumer perspective, which is, ‘If everyone waits to buy everything on sale, then either your product isn’t priced correctly, or quality is not sufficient,’.”
Macy’s CEO Jeff Gennette said in an interview that the department store has tested its pricing approach. It has learned there’s a “price ceiling” for commodity items such as a basic T-shirt or a pair of denim jeans — but not as much on a fashion-forward top.
Others retailers also spoke out about a lower price-sensitive customer base.
TapestryStuart Weitzman is a brand owned by Coach, Kate Spade, and Coach. They have noticed that handbags are much more affordable than full-priced items. The company’s CEO Joanne Crevoiserat said style, not just low price, is inspiring customers to buy.
In an interview, she stated that “We are seeing very little price resistance.” “And, you know that I believe that this is a signal of our pricing power.”
Und Newell BrandsCalphalon is owned by Calphalon. Kris Malkoski (CEO of home solutions) stated that consumers are buying high-end cookware and food storage.
The question, however, is whether that willingness to splurge is a short-term change to consumer mindset — or a lasting shift in people buying the goods they want, with less of a focus on price.
WalmartAnd TargetI have gone in the opposite direction. vowing to hold down price and emphasize value in an inflationary environment.
Get holiday discounts expected to hit a recordThe National Retail Federation estimates that sales of $843.4 billion-$859 billion represent an 8.5% to 10.5% rise in revenue.
Thomas said if holiday sales meet or exceed those expectations — even during a period when inflation has hit a more than 30-year high — retailers may feel emboldened to keep prices higher in the future.
Fitzgerald purchased the Lego set. He said he had seen supply chain problems in recent months. Some hair color, shampoos, and other products have been delayed at Fitzgerald’s hair salon. When he was getting ready to host an out-of town guest, he couldn’t find the right shower curtain liner in the shop.
He expressed his delight at finding the Home Alone Lego Set and said he is keen to gift it to Will. It is their first holiday season together — and this year, they plan to get engaged. This made it worth paying the extra cost and effort to have the set sent by a friend to Virginia.
He stated, “I prepared the groundwork for him to say that he was not getting it.” So I’m sure he will be very surprised. Although I doubt I will ever be able surprise him as much, we are getting married this year. It’s also our first major holiday season together so I wanted it to be memorable from start to finish.