Consumers, Stores Face Off Over Depth of Holiday Discounts
NEW YORK and CHICAGO -- Target's (TGT) 10 percent discount on a $30.49 pair of embroidered curtains wasn't nearly enough to entice Valerie Jenkins, shopping in Chicago the weekend before Thanksgiving.
She expects the 60 to 70 percent off she got during the last holidays. "There were some very good deals this time last year," she said.
Jenkins represents a problem for retailers going into what traditionally has been the peak shopping day of the holiday season, Black Friday. Big retailers are keeping discounts for the weekend following Thanksgiving at around the same level as last year, according to data supplied to Reuters by MarketTrak.
But polls by Reuters/Ipsos and some others show shoppers, who got even bigger discounts closer to Christmas last year, are cautious with their spending and willing to wait for deals.
The Reuters/Ipsos survey found more people planned to cut holiday spending than increase in every category surveyed: clothing, jewelry, electronics, food and toys, and that 46 percent felt they could wait longer in the season to buy because of faster shipping.
Black Friday shopping will help set the tone for the rest of the holiday season, signaling to retailers whether they need to drop prices or change promotions. While Black Friday isn't always a strong forecaster of holiday spending, last year reports of poor Black Friday spending were followed by deeper discounting and a rush of buying in the week before Christmas.
J.C. Penney (JCP) offered an average 58 percent off in Black Friday ads this year, down from 59 percent last year, according to MarketTrak, which looks at circulars from top retailers. Kohl's (KSS) is offering 54 percent off, up from 51 percent in 2014, and discounts from Staples (SPLS) and Office Depot (ODP) are both a touch less than last year, at 45 and 50 percent, respectively.
Appliances, entertainment items, infant products and hardware showed narrowing discounts, MarketTrak reported, while promotions for apparel, toys and electronics were getting bigger.
Kurt Jetta, head of retail industry researcher TABS Group, found the discounts underwhelming.
"The fact that retail has been so weak coming in to the season would suggest they may need to ramp up efforts to make up for this later," Jetta said.
Consumers were cautious going into the holidays, with sales at Macy's, Nordstrom Inc and Best Buy missing expectations in recent quarterly results. Target's online sales fell due to a drop in demand for electronics.
Looking for Discounts
The Reuters/Ipsos survey of 4,639 adults from Nov. 12-23 found 28 percent of consumers expected discounts of 50 percent or more on most items, 36 percent hoped to see promotions of at least 33 percent while 49 percent expect a minimum discount of 20 percent on most products.
A survey for Boston Consulting Group found 70 percent of consumers would spend the same or less as last year, describing the consumer outlook as "tepid."
Still, spending intentions are difficult to gauge and Gallup reported Americans plan to spend $830 on gifts this season, up from $720 a year ago at this time.
The National Retail Federation expects holiday sales to rise 3.7 percent, slower than last year's 4.1 percent growth rate, due to stagnant wages and sluggish job creation.
Many retailers including Macy's (M) came into the season with high winter clothing inventory after warm weather in September and October, which also will increase discounting pressure.
"Consumers have been trained to know that they can wait, and they will wait and that will force the retailers to continue to be promotional," said Joel Bines, managing director at AlixPartners.
-Nathan Layne in Chicago and Sruthi Ramakrishnan in Bangalore, India, contributed reporting.