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Why Retailers Are Trying Extra Hard to Woo Holiday Shoppers

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Amazon held another Prime Day in October, covering its site with deals. Best Buy launched Black Friday-level sales last month.And on Friday, Kohl’s counted the first 200 people to walk into each store. Sweepstakes, Includes prizes like a gift card to Sephora and a family trip to Legoland Resort.

With the all-important holiday shopping season approaching, retailers aren’t just competing to attract customers. They are also competing with watches.

For now, Americans continue to spend, fueled by pandemic-era savings and a red-hot labor market. But at the same time, prices are rising at their fastest pace in decades and the Federal Reserve is trying to keep prices in check by raising interest rates. , consumers become pessimistic about the economy. And a recession is a definite possibility.

Some retailers have excess inventory and want to sell as much as possible while consumers are still pulling out their wallets. As such, they are pushing discounts on customers, hoping to entice them to buy before the economic slowdown again causes a change in behavior.

A retailer’s success is critical. Billions of dollars are at stake, and businesses are watching the outcome closely as they make their hiring and investment decisions for the new year.

Target CEO Brian Cornell said: he said in a call with analysts earlier this month.

More broadly, retail sales during the holiday shopping period could provide clues as to the trajectory of the economy in the coming weeks and months.

EY-Parthenon economist Lydia Boussour said: “I think it’s going to be very important for the economy as a whole to see what consumers are doing because that’s the key indicator.” . “It’s a key driver of growth.”

Private consumption, which accounts for about 70% of total economic growth, is expected to remain strong in the fourth quarter, largely driven by household savings. Thanks in part to government support, Americans still had about $1.7 trillion in extra savings accumulated during the pandemic by mid-year, according to Federal Reserve estimates.

But in September, the latest month for which the calculations were available, Americans saved only 3.1% of their after-tax income, less than half what they had before the pandemic. We are seeing our savings dwindle even faster than those who are wealthy.

On the other hand, the credit card balance in the third quarter was 15% inflated compared to a year ago, according to the Federal Reserve Bank of New York. This was the biggest increase in more than two decades as consumers increasingly rely on credit despite rising borrowing costs.

and, University of Michigan survey “Consumer sentiment” dropped sharply this month. It is a measure of how people feel about their economy and financial situation. Even though consumers continue to shop, “they are depressed about the overall economic situation and will become increasingly reluctant to spend,” Boussour said.

October retail sales grew by 1.3%, better than expected. Some large retailers such as Walmart and Home His Depot reported strong earnings in the third quarter. This is supported by sales of less discretionary items such as groceries and items related to home improvement and do-it-yourself projects. “Households are still spending money because they can,” said Aneta Markowska, chief financial economist at investment bank Jefferies. “I think there’s still a lot of uncertainty about next year because the Fed has clearly been very aggressive in raising rates this year and hasn’t really felt the impact yet,” she said.

However, several retailers said demand for their products was weak that month, and that when shoppers actually make purchases, they appear to be motivated by sales. Some companies have lowered their financial outlooks or refused to provide forecasts for the next year outright to avoid being stuck in a stalemate.

This was not how the end of the year should be. During the two holiday shopping seasons, retailers struggled with the disruption caused by the pandemic. Retailers were hoping for a return to normalcy now that the virus restrictions and supply chain disruptions that defined these times have eased significantly.

Instead, retailers find themselves trying to weather the expected economic slowdown.

To attract bargain-hungry shoppers and move unwanted inventory, many companies are touting ‘value’, with steeper discounts and lower prices than last year, even as labor costs remain high. offers. Many started their holiday blitz early in hopes of a surge in sales. Target said he had Deal Day in October, and Old Navy rolled out a holiday campaign that said, “I’m sorry, I’m sorry.” “Value is clearly important to everyone,” Best Buy Chief Executive Corey Barry said on the company’s earnings call last week.

JC Penney returned to the 5 a.m. Doorbuster on Black Friday to advertise “pre-inflation pricing” on products such as Instant Pots, curling irons and coats.

Macy’s CEO Jeff Gennette said the website’s feature, which allows users to peruse gifts ranging from $15 to $100, seems particularly appealing to shoppers.

“If you have a product that competes with a competitor and the price is higher, you have to make adjustments for those,” he said.

Retailers are trying to remove barriers between shoppers and potential purchases. According to Jill Timm, chief financial officer of Kohl’s, the chain offers shoppers more personalized offers, clearly stating discounts on specific items so customers “have to do the math”. to prevent confusion.

Kohl’s “makes sure that the offers it provides are meaningful and incentivize customer action,” says Timm.

As international clothing retailer Primark seeks to expand its presence in the United States, communicating value is part of its overall strategy.

At a recently opened store in a shopping mall in Garden City, New York, Primark executives sell $11 hoodies, $4 biker shorts, and $20 baby blue bags featuring Stitch from Disney’s Lilo and Stitch. I pointed out a big sign advertising and pointed out: Candles are 90 cents without holiday discounts, cheaper than Walmart.

Kevin Tulip, President of Primark USA, said:

Shoppers appeared to be price conscious throughout Black Friday and the weekend.

Retailers slashed online prices for goods such as toys, electronics and computers, according to data released by Adobe Analytics on Friday. Discounts on sporting goods and TVs this year were much higher than last year, according to Adobe data, and clothing prices were slightly lower this year.According to Salesforce, the average discount rate for Black Friday deals in the U.S. is It was his 30%. According to Salesforce, the average Black Friday discount in 2019 was 33%.

Mastercard SpendingPulse data released on Saturday showed store sales on Friday increased 12% from last year and e-commerce sales increased 14% compared to 2021. These sales included spending at restaurants as well as retail stores.

Still, not everyone was satisfied. On social media, people complained that the Black Friday deals weren’t as big as expected.

In San Francisco, 24-year-old Liz Gordon woke up at 6am on a Friday to shop with her parents and sister. It was a “long family tradition” to go to the store that day, and they had already picked out Christmas gifts and little presents.

“Prices are a lot different than they were 10 years ago,” Gordon said.

On Sunday at Target in Springfield, Illinois, DJ Bagherie, 69, scrambled to find one of his last Christmas gifts: a white knitted throw blanket. She spent most of her weekends shopping online, going through her grandchildren’s wish list.

Bagheri lives on a fixed income and said the hike in gas and household items was “silly”. Asked if she planned to cut back on her spending in the coming weeks, she said, “Oh yes. I’m done with this.”

Ben Casselman When Curry Huang contributed to the report.

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