Christmas holiday discounts have become a ritual of U.S. retailing, with shoppers lining up outside malls on the day after Thanksgiving hoping to snag a deal for $19 air fryers or cheap flat-screen TVs. Even during the pandemic, the traditional yearend dash for deals continued, as shoppers accustomed to price cuts of up to 40% simply shifted to ordering online. But U.S. retailers are making a risky bet this holiday season by cutting back on discounting.
Their calculation is a simple one. Many merchants are forecasting demand to be strong, while gummed-up supply chains translate into having less inventory to sell. That means there’s no need to be as promotional as during Christmases past.
While it makes sense on paper, the strategy has plenty of risks. After cutting back at the height of Covid-19, Americans have splurged this year, and sales growth estimates for the holiday season range from 6% to about 10% from 2020. But now shoppers are facing rising costs for basics such as food, gasoline, and energy. Year-over-year inflation rose 6.2% in October, the largest increase since 1990.
Inflation worries have also driven down consumer confidence. And spending could be muted by surging transportation costs that have limited the selection of goods at many chains by making some items too expensive to ship. One toymaker said there wouldn’t be as many bulky stuffed animals and toy trucks on shelves, because companies were reserving whatever precious cargo space they could secure for their highest-margin goods.
This story is from the November 22 - 29, 2021 edition of Bloomberg Businessweek.
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This story is from the November 22 - 29, 2021 edition of Bloomberg Businessweek.
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