Consultant Insight: Record retail discounting expected this holiday season

Record discounting is expected this holiday season as retailers work to unload overflowing inventories amid softening consumer spending. Markdowns are predicted to be as high as 32% for computers, up 22 percentage points from 2021, according to computer software company Adobe . Discounts on electronics are expected to hit 27%, up 19 percentage points year over year, while markdowns on toys will reach 22%, up 3 percentage points YoY. Inventories have swelled as consumer spending eased and supply chain disruptions continue. [caption id="attachment_76185" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] Furniture, home furnishings, electronics and appliance stores inventories were up 23% YoY in July, seasonally adjusted, while sales were down 3.8% for the same period, according to U.S. Census data. Meanwhile, inventories at clothing and accessories stores in July increased 28% YoY while sales dipped 1.5% YoY, seasonally adjusted. “Earlier ordering by retailers, driven by strong consumer demand and less predictable delivery timelines, had led to elevated inventory levels broadly across consumer goods.,” Matt Friend, chief financial officer at Nike, said during the company’s fiscal year Q1 2023 earnings call Sept. 30. “Transit times began to rapidly improve with signals that further improvement may be coming. At the same time, consumers are facing greater economic uncertainty, and promotional activity across the marketplace is accelerating, especially in apparel,” he added. Consumer spending forecast As retailers enter the holiday season, the need to unload excess inventory will be great. But will consumers spend? Forecasts suggest they will. Adobe joins a list of other firms forecasting a positive holiday season this year. Adobe expects U.S. online holiday sales to hit $209.7 billion from Nov. 1 to Dec. 31, representing 2.5% YoY growth. But don’t expect this holiday season to be a typical one. Retailers such as Amazon, Target and Walmart have already kicked off the season with special sales events in the hopes of offloading inventories, while last-mile providers have more capacity than they know what to do with. After falling short in 2020, last-mile providers invested in new facilities and upgraded old ones to improve efficiencies across networks. However, lower parcel volumes are expected as more consumers return to stores and retailers add to their last-mile carrier lists. Upcoming holiday season Citing an internal FedEx memo, Reuters reported FedEx Ground expects to lower volume forecasts to reflect customers’ plans to ship fewer holiday packages this year. Meanwhile, holiday expectations from Amazon and UPS appear to be similar to the 2021 holiday season. Both companies announced plans to hire the same number of seasonal workers this year as in 2021. Air cargo volumes are also expected to be lower during the holiday season. Typically, retailers utilize air cargo to replenish inventories quickly to avoid stockouts. But this year, with ample inventories, the need for air cargo will not be significant. Despite heavy discounting for the holiday season, inventory woes may extend into 2023 as demand for new products from manufacturers is expected to decline. January 2023 imports are forecasted at 2.06 million 20-foot equivalent units (TEUs), down 4.9% from January 2022, while February 2023 is predicted at 1.8 million TEUs, down 15% from 2021, according to the latest Global Port Tracker from the National Retail Federation and Hackett Associates.

Consultant Insight: Record retail discounting expected this holiday season

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