High inventory means big discounts, inflation relief

  • With soaring inventories and an uncertain economic outlook, retailers could begin aggressive selling.
  • Buyers might finally get a little break from inflation this holiday.
  • But that’s only if consumers have enough money and enough confidence in the economy to spend.

Discounts are what consumers want and that’s likely what they’ll get this holiday season, analysts say, but how much consumers can afford to spend remains the wild card.

Overall holiday sales between November and January are expected to rise 4% to 6%, from 15.1% last year, to $1.45 trillion to $1.47 trillion, Deloitte said. E-commerce sales will grow 12.8% to 14.3%, year over year, to between $260 billion and $264 billion this season, he said.

Much of the increase in dollar sales will be the result of higher prices, however, with retailers seeing much less sales volume, Deloitte said. If nominal sales, or dollar sales, are adjusted for inflationsome analysts believe that retail sales could decline from last year.

“The macro-environment is deteriorationnot improving,” said Mari Shor, senior research analyst at Columbia Threadneedle.

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Amazon’s two-day Prime Day eventfrom Tuesday will determine the pace of holiday sales in terms of consumer spending mood as well as the duration of discounts, analysts said.

The e-commerce giant July 48 Hour Event recorded spending of $11.9 billion, up 8.5% year over year, and increased average online income in the United States by 141% from a day in June average, according to Adobe analytics. It was the “biggest e-commerce moment of 2022,” he said.

“We expect Prime Day to drive discounts and sales forward,” said Patrick Brown, vice president of growth marketing and insights at Adobe.

To compete, other retailers like walmartKohl’s, Macy’s and Target all have multi-day advance sales.

Brown said consumers are likely to see online discounts as high as 15% this month, up from an average of 10% early last year, as retailers grapple with overflowing inventory and an environment of consumer spending softening.

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What happens if first sales are lower than expected?

Expect consumers to get a reprieve from inflation as retailers may start to feel the pressure and aggressively discount to clear inventory.

Already in early summer, retailers like Target and Walmart said they had too much inventory. When shipping was blocked, they would order more in hopes of getting more, then when the ports opened up, all the goods poured into their warehouses. They said they would reduce prices over the summer to move inventory and make room for holiday merchandise.

In the third quarter, however, the companies revealed on earnings calls that inventories had ballooned further.

“If early sales are lackluster, retailers are very concerned,” said Sarah Wyeth, head of retail and restaurant industry at S&P Global Ratings. “They don’t know how bad it’s going to get for consumers in November. consumer confidence can go down again and the (midterm) election is a wild card.

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How much discount can consumers expect?

Record discounts, says Brown. He predicts online discounts could reach 32% or more as November approaches if retailers feel they are not getting enough early traction. For the season between Nov. 1 and Dec. 31, Adobe forecasts online sales to grow 2.5% year-over-year to $209.7 billion, which may not sound like much, but it notes that consumers have already spent a lot online so far this year.

Computers, electronics and toys are the main price drops. Discounts on computers hit 32%, down from 10% last year, while electronics hit 27%, down from 8%, Brown said. Even prices for toys, a holiday staple, are expected to drop 22%, more than last year’s 19% price drop, he said.

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When can I expect the best sales?

It depends on what you want to buy, but in general, according to Brown, the biggest online discounts will be applied between Thanksgiving and Cyber ​​Monday.

Thanksgiving Day (11/24) will be the best day to buy electronics online, while black friday (11/25) will have the best TV deals. This Saturday (11/26) will have the biggest discounts for toys, with the best deals on apparel and sporting goods arriving on Sunday (11/27). Those looking to buy a computer or furniture should shop on Cyber ​​Monday (11/28), and home appliances will get the best discounts on 12/1, he said.

But if you haven’t shopped by early December, don’t worry, Shor says.

“I’m very confident that I’m not going to trick you into telling you that you can expect cuts,” she said. “People will be waiting for discounts, especially since the narrative in the media is that inventory is heavy and promotions are coming. Out-of-stock levels will also be low, so you don’t have to worry too much. .

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Should I shop in person or online?

If you shop early, you might find great deals online and the best shipping rates. FedEx, USPS and UPS are increasing their shipping rates during the peak holiday season and, for the first time, Amazon is increasing its fulfillment fees for merchants.

But last-minute shoppers can find the biggest discounts and avoid shipping costs by visiting in person or using curbside pickup.

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Stores can be crowded due to “pent-up demand to do things in person,” Wyeth said. “Some people are really enjoying this crazy holiday madness and missing it. It’s going to be the first normal holiday in a while. There aren’t too many extraneous things, like social distancing, to the pandemic. There’s also less excess money and abnormally high consumption I think will give us a better idea of ​​what the future holds for consumer demand and how they want to shop.

Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and sign up for our free Daily Money newsletter for personal finance tips and business news Monday through Friday mornings.