Shock sticker could change the way retailers are selling

Shoppers watch Macy’s Black Friday specials in Momi, Ohio on November 27, 2020.

Stephen Zenner | SOPA Images | LightRocket | Getty Images

Keith Fitzgerald went to great lengths to get the perfect gift this holiday season.

Fitzgerald, a 40-year-old hairdresser, searched the Internet and in stores for a special edition of Lego: a set of almost 4000 items reminiscent of the home from the Christmas classic Home Alone – complete with booby traps and a cable to the backyard treehouse. He knew that the $ 250 set would please his boyfriend on the last night of Hanukkah.

However, when he visited the Lego website, the set was sold out. They were not in the nearest stores. He reached out to family and friends across the country and enlisted the help of a friend who was queuing at a store in New York, bought it for him, and agreed to ship a giant box to his home near Richmond, Virginia.

“Shipping is a little more expensive, but worth it,” Fitzgerald said.

Consumers’ huge appetite for spending and a global supply chain crisis are facing this holiday season. For shoppers, this makes some desirable toys, clothing, and other items difficult to find, even though retailers like Walmart and Target say there will be plenty of items to choose from on shelves. It also leads to higher prices and a change in the scenario for buyers who were previously motivated by the transaction.

According to Adobe Analytics, which tracks retailer websites, U.S. consumers will receive lower discounts across all major gift categories. For example, discounts on electronics are expected to peak at 22% during the holiday season, up from 27% in 2020. Discounts on toys will peak at 16%, up from 19% a year ago. The company predicts that apparel consumption will peak at 15% instead of 20% in 2020.

Shoppers will continue to get the biggest discounts during major retail holidays, Thanksgiving, Black Friday, and Cyber ​​Monday, according to Adobe. But even these prices will not be that low. Adobe estimates that, on average, shoppers will pay 9% more for Cyber ​​Week than a year ago.

“It’s good that he’s on the shelf”

Retraining buyers

For retailers, moving away from sharply discounted prices and competing with competitors on price alone could create new opportunities for retailers, says Kathy Thomas, chief executive of the Kearney Consumer Institute. In the short term, companies can eliminate inflated material and shipping costs and have fewer items to be discounted and added to the customs clearance counter.

In the long term, she said, this could provide an opportunity to retrain American buyers who have long been tied to deals.

“Other countries don’t make discounts like we do,” she said. “We taught American consumers to just wait until everything is okay.”

This can have serious implications for the operating profitability of companies and can lead to increased profits.

She said retailers can test and learn how to set prices correctly or stand out in other ways. For example, direct-to-consumer companies such as Luggage Company Away and clothing retailer Everlane instead rarely offer discounts and advertise their exclusive products or customer service. Some like Apple has such a loyal fan base that people will queue for hours to buy a full-price product.

“I think about it from the simplest consumer point of view, which is, ‘If everyone is waiting to buy everything on the bargain, then you just have the wrong price or your quality is not good enough,” she said.

Macy’s CEO Jeff Gennett said in an interview that the department store has tested its approach to pricing. He learned that there is a “price ceiling” for FMCG items like a simple T-shirt or a pair of jeans, but not so high for a fashion top.

Other retailers also claim to see customers who are less price sensitive.

Tapestry, which owns Coach, Kate Spade and Stuart Weitzman, has noticed that shoppers are more willing to pay for bags, even if the items are at full price. Company CEO Joan Crevoisiera said style, not just low price, inspires shoppers to buy.

“We are seeing little price resistance,” she said in an interview. “And you know, I think that’s a signal that our brands have price power.”

Chris Malkoski, CEO of home solutions company Newell Brands, owner of home brands such as Calphalon, said consumers are buying premium versions of cookware and even storage products.

The question, however, is whether this willingness to spend money on a short-term change in consumer thinking or a long-term shift in people buying the goods they want with less emphasis on price.

Walmart and Target have gone the other way, vowing to contain prices and emphasize value in the face of inflation.

Holiday sales are expected to hit an all-time high of $ 843.4 billion to $ 859 billion, up 8.5% to 10.5%, according to the National Retail Federation.

Thomas said that if holiday sales meet or exceed those expectations – even as inflation peaks at more than a 30-year high – retailers may feel the courage to hold prices higher in the future.

Fitzgerald, who bought the Lego set, said he has seen supply chain problems in recent months. Some hair dyes, shampoos and other items were not ordered from his hairdresser. He recently struggled to find a shower curtain liner in the store when he was preparing to host a guest from out of town.

He said he was thrilled to find the Home Alone Lego set and is very keen to pass it on to his boyfriend Will. This is their first holiday season together and they plan to get engaged this year. It justified the high price tag and the hassle of shipping the kit from a friend to Virginia, he said.

“I laid the groundwork to tell him he doesn’t get it,” he said. “So I think he’ll be really surprised. I don’t think I can always surprise him that much, but this year we got engaged and this is our first big holiday season together, so I wanted to be sure it would be an unforgettable holiday season.” from the beginning to the end “.

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