Sharply dressed retail execs entered the holiday season with their typical bravado, but are prepared to exit the period humbled, heads down. Here are five explanations for weekly inventory and promotional creep since Black Thursday…
- There is a dark, ruthless underworld beneath +4.1% GDP: Those households not heavily impacted by higher stock and home prices: (1) lack the cold hard cash, or digital cash, to buy as much goods and services as retailers want and planned for, hence they are being forced to jack up promotions…and the consumer still is unable to respond in the form of a transaction; (2) those that do have a little more monthly budget flexibility continue to analyze the true value of buying that extra non-essential gift, for instance wondering: “will my child learn anything from this Leapfrog toy masked as a toy AND be using it in April of 2014?”
- The keys to overspending are missing: (1) Trips to the discounters and malls in between pay periods remains the exception rather than the norm; (2) savings (rate at 4.2%) is not being aggressively driven lower to reach for non-essentials.
- Hip to the game: The secrets of retailing have been exposed thanks to mobile. Even at 50%, consumers realize that prices were marked up beforehand, so they should wait to see that red sign on a pair of Levis that reads 70% off.
- Cheaper product quality: Apparel and toy manufacturers have cut product quality continuously since 2009 to save money, and the consumer knows that the prices should be lower to compensate for reduced durability.
- Mobile price discovery: In the minds of the price conscious consumer, buying an item online is an all-around cheaper alternative to buying it in the stores even when factoring in a 50% off sale. Consider the time factor and the actual out of pocket expenditures, for example gas and the splurge on a Starbucks latte.