With Halloween behind them, many shoppers will now be turning their focus to the winter holiday season and searching for the best deals on gifts, especially with Black Friday and Cyber Monday on the horizon.
But this year, consumers looking for bargains could be left disappointed, as retailers are expected to offer lower discounts in the face of significant supply chain problems caused by the COVID-19 pandemic.
“Retailer sales and discounts will not be at quite the same level as last year,” Ray Wimer, an expert in retail practice at Syracuse University, said in an email to the Washington Examiner. Labor shortages among truck drivers, port workers, and other positions within the supply chain are delaying the time it takes for products to travel from factories overseas to store shelves and affecting pricing, Wimer said.
“Estimates are running from 30 to 60 days longer,” said Wimer, a professor at Syracuse’s Whitman School of Management. “This means you would want to buy the items now instead of waiting and missing out. This also means waiting for an item to go on sale is a riskier strategy, as demand is high and consumers are willing to spend at nonsale prices.”
According to Adobe Analytics, shoppers can expect discounts in the 5% to 25% range this year, down from 10% to 30% in years past, which measures shopping trends. The lower discounts combined with already inflated prices, also primarily due to supply and demand issues, means many consumers could be spending more than ever on holiday presents this year.
The National Retail Federation estimates that consumers could spend between $843.4 billion and $859 billion throughout November and December, more than ever before, and an increase of 8.5% to 10.5% compared to last year.
“The outlook for the holiday season looks very bright,” National Retail Federation chief economist Jack Kleinhenz was quoted as saying in the group’s Oct. 27
press release
announcing the sales forecast. “The unusual and beneficial position we find ourselves in is that households have increased spending vigorously throughout most of 2021 and remain with plenty of holiday purchasing power.”
Consumers have already seen weaker deals during holidays this year because of shortages and “surging online demand,” Adobe said. Prices dropped only between 2% and 7% on products such as electronics, toys, and home goods on Memorial Day and Labor Day this year, less than the discounts of 5% to 11% in the two years prior.
Macy’s has been among those retailers offering fewer discounts in light of the supply crunch this year, its executives
reportedly
said at a Goldman Sachs conference in September. “From a promotional standpoint, this year’s promotional levels have been lower than historical levels,” said Adrian Mitchell, Macy’s chief financial officer, “and we’ve been thoughtful about the categories that need promotion, and we’ll continue to do so.”
Adobe noted that typically, product prices drop slightly through the course of the year, even before holiday sales. “However, as inflation has been on the rise throughout much of this year, prices have been left at more elevated levels, ramping into the holiday season,” the company said in its 2021 holiday shopping forecast. “This development reduces the total realized savings consumers can expect to experience on products this year.”
According
to the latest data
from the Bureau of Labor Statistics, the consumer price index that measures the price of goods and services has shot up throughout the pandemic, rising 5.4% in the 12 months ending in September. Meanwhile, the producer price index, which measures wholesale costs that are often passed down to consumers,
rose 8.6
% over the same 12-month period, the biggest increase since the Bureau of Labor Statistics started measuring the data more than a decade ago.
“Pandemic-related supply chain disruptions have caused shortages of merchandise and most of this year’s inflationary pressure,” said Kleinhenz, the NRF economist. “With the prospect of consumers seeking to shop early, inventories may be pulled down sooner, and shortages may develop in the later weeks of the shopping season. However, if retailers can keep merchandise on the shelves and merchandise arrives before Christmas, it could be a stellar holiday sales season.”
Many retailers are encouraging shoppers to buy early to avoid both shortages and shipping bottlenecks. Target and Best Buy, for example, are offering price-matching guarantees, so customers know they’ll still get the best deal.
“These are promos that allow shoppers to get a refund of the difference if something they bought early goes on sale for a lower price before Black Friday,” Kristin McGrath, shopping editor and expert at RetailMeNot, told
NBC News
. “Whereas in the past, retailers enticed shoppers with free shipping, this year, they’re trying to instill confidence in early shopping.”
“The Etsy marketplace is structured differently than many retailers–most of our sellers are businesses of one and don’t rely on just-in-time supply chains to create their unique and handmade inventory,” Etsy CEO Josh Silverman wrote in a blog
post
on Oct. 27. “The average Etsy seller works from home without complex overseas production lines and fulfillment requirements, and their supply chain looks a lot more like locally-sourced raw materials and two hands.”
Consumers are also being
encouraged
to buy more from small or local businesses that don’t rely on the global supply chain as heavily to fulfill their holiday gift shopping needs this year. Etsy, an online marketplace for artisans and other small businesses, is encouraging shoppers to increase their use of its services this year in light of the shortages and delays that larger corporations are facing.
Shoppers appear to be taking note of this year’s challenges, according to another firm that measures shopping trends. A little more than half of consumers, or 51%, plan to start their holiday shopping before Thanksgiving, according to the results of a survey by NPD Group
released
in October, which is slightly higher than in 2020.
“Holiday shopping has been on an earlier start trajectory since Thanksgiving Day store openings in 2014 and then further accelerated by last year’s pandemic shift of Amazon’s Prime Days to October and panic over shipping delays,” said Marshal Cohen, NPD’s chief retail industry adviser. “Holiday 2021 continues the early shopping trend, with the added layer of inventory concerns motivating many shoppers to grab what they want when they see it, instead of waiting for better deals later in the season.”
Another survey found even more people, 83%, planned to start their holiday shopping before Thanksgiving. Among them, nearly 40% of consumers planned to start as early as September and August, according to RetailMeNot, which released the
results
of the 1,082-person poll in September.
Adobe said it still expects the best discounts — those in the 15% to 25% range — to be found over Thanksgiving week and the Cyber Monday that follows, though. “Consumers have come to expect the strongest discounts over days like Black Friday and Cyber Monday, and retailers have been shown to deliver while also encouraging early seasonal buying,” Adobe said.
