Retailers are cranking up the holiday markdowns

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By: Johnathan Berr | CBS News MoneyWatch
December 5, 2016

(CBS NEWS) -- With holiday shopping kicking into high gear, many retailers are rolling out deeper discounts to win consumers’ business. Median discounts across top retailers during Thanksgiving weekend increased by 5 percentage points to 16 percentage points over 2015, according to Boomerang Commerce, a provider of retail pricing data.

Target (TGT) offered a median discount for products listed on the first page of its Black Friday deals web page of 43 percent, an increase from 27 percent last year. Discounts for rival Walmart’s (WMT) similarly promoted items rose from 28 percent to 33 percent, according to Boomerang. Smaller retailers are also getting in on the markdown action.

Urban Outfitters (URBN) had a buy-one-get-one-50-percent-off offer at its flagship stores for all apparel during the Thanksgiving holiday period, according to a client note from Wedbush Securities. The trendy retailer had discounts of 30 percent to 40 percent last year on items that were on clearance.

At Coach’s (COH) Thanksgiving Sale, consumers could get 30 percent off, whereas last year the discounts varied depending on what they spent. L Brands’ (LB) Victoria Secrets “generated strong traffic with lines out the door at many locations” with its 50-percent-off deal on certain bras, Wedbush said. Last year, customers of the lingerie chain had to buy one bra to get another half off.

“It’s more promotional than last year,” said Boomerang CEO Guru Hariharan, a former Amazon (AMZN) and eBay (EBAY) executive. “Every single year in the past 10 to 15 years, we’ve seen this trend of revenues during the holiday season going up … but with profits declining.”

The National Retail Federation expects holiday sales to jump 3.6 percent to $655.8 billion for 2016, well above the 10-year average of a 2.5 percent rise, thanks to growth in consumer confidence, among other things. Consulting firm PWC sees holiday spending hitting its highest level this year since the Great Recession, increasing 10 percent over last year. A study released by Visa (V) is forecasting an increase of at least 18 percent in online sales.

The discounts are more planned this year than last year because retailers have better control of their inventories, according to Howard Davidowitz, a New York-based retail industry consultant. The deals will get better as Christmas nears. “Store margins won’t collapse,” he said.

That’s key because during the holiday season, retailers need to provide deals to bargain-hunting consumers without harming their bottom lines. After all, this is the time when they earn most of their annual profits.

In recent years, retailers such as Walmart have invested billions to beef up their e-commerce businesses to provide “multichannel” services to customers, such as allowing them to order online and pick up in a store. They’re also adjusting to the growth in online shopping and the heightened price competition that comes with it, in particular from Amazon.

Boomerang found 52 percent of the deals being offered on what it identified as the 200 most popular products on Amazon from Nov. 23 to Nov. 26 were as cheap or cheaper than deals on other sites such as Walmart, Target, GameStop (GST) and Best Buy (BBY). That’s why retailers can’t afford to take Amazon -- or any other competitor -- for granted during the competitive holiday season.

Boomerang’s Hariharan noted that Amazon changes prices about every 15 minutes in response to competition. Other retailers adjust prices as often as five or six times a day.

A spokesman for Seattle-based Amazon declined to comment on Boomerang’s findings, except to state: “Customers expect to come to Amazon and find the lowest prices. We do the hard work for them, finding the best prices out there and meeting or beating them for all customers, every day, across the entire selection of items sold by Amazon.com.”

Added Hariharan: “The best-in-class retailers have upped their game regarding their ability to react to competition.” That’s good news for consumers no matter what time of year.



 
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