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The biggest challenge for retailers this holiday season will be chasing cash-strapped shoppers.
The consistent uptick in prices for everything from groceries to fast food could also hit retailers, who often pull out big deals to win key holiday sales, according to retail experts.
Research firm Mintel found that 64% of consumers surveyed want to spend the least amount of money possible during this year’s winter holiday. And 54% plan to shop for fewer gifts than a year ago.
While total retail sales have grown modestly this year, the growth is primarily coming from value-focused retailers like T.J. Maxx and Costco, where people are looking for deals, said Marshal Cohen, chief retail advisor at Circana. The CNBC/NRF Retail Monitor, a joint report from CNBC and the National Retail Federation, found that total retail sales in July were up 0.92% year-over-year.
“This will be the year where we think about holiday from a value perspective,” Cohen said. “The consumer has clearly shown the world that they are looking for better value—they’re not looking for the lowest price but about making their dollar go as far as it can.”
Cohen expects retailers to crank up the number of deals offered between November and December. While those deals won’t offer shoppers deeper discounts, they will be more frequent to encourage quick spending, he said.
But these promotions don’t necessarily get people to spend. “Promotions don’t have the same impact that they have in the past,” he said.
Plus, an increase in promotions can dent retailers’ profitability, said Steve Dennis, a former retail exec and president and founder of SageBerry Consulting.
“The profitability of that is often pretty questionable, and retailers need to be careful to avoid the proverbial race to the bottom,” he said.
In-store shopping is back
The growth of online sales during Black Friday and Cyber Monday, particularly at Amazon, has caused some consumers to pull back on in-store shopping. But with shoppers spending less money, Cohen expects retailers to heavily push people toward shopping in stores this year. Unlike ecommerce, retailers can try to drive sales of impulse items in stores.
“We will see the return of doorbusters,” he said. “You will see online and store retailers be very aggressive.”