Consumers Brace for Fewer Holiday Discounts

Retailers Rein in Discounts for Holiday Shoppers

Due to supply-chain delays, persistent inflation, and strong demand, discounts will be harder for consumers to find this holiday season. Most products, from apparel to toys, are expected to sell for full price or close to it.

Macy’s (M), The Gap (GPS), and a host of other retailers and brands are scaling back their traditional discounts this holiday season. This marks a big departure for retailers, which for years offered large discounts and promotions during the holidays.

Retailers Try to Change Consumer Behavior

Prior to the pandemic, retailers were reliant on discounts to drum up sales during the holiday season, with consumers waiting to make purchases until holiday deals hit. But given changing market conditions, retailers are working to change these shopping habits. Home Depot (HD) has been transitioning away from discounts for several years, but those efforts sped up during the pandemic.

Due to issues with the supply chain, consumers are likely to end up paying more for sought-after items this holiday season. However, this may not be the case for all products. If certain seasonal items arrive late because of shipping delays, retailers will probably offer big discounts on these products.

Lack of Inventory Causes Concerns

The lack of discounts this holiday season will boost retailers’ margins, but it could hurt companies if these trends prompt consumers to spend less during the holidays. Consumers are also facing a lack of inventory, which could be frustrating. Since January 2020, out-of-stock messages online are up 172%.

Retailers have pricing power thanks to pent-up demand this holiday season. For now, consumers seem willing to shoulder the extra costs. It will be interesting to see if that continues as we head toward the busiest months for holiday shopping.

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