NEW YORK (MainStreet) — The bad news? The economy is still trying to drag itself out of the sticky bog of slow growth. The good news? Retailers are going to fight for your hallowed holiday dollar with even deeper discounts.
The National Retail Federation is predicting holiday sales to grow "marginally" by 3.9% to $602.1 billion. Meanwhile, online sales are expected to leap 13% to 15% over last year to as much as $82 billion. Brick-and-mortar retailers are expected to ramp up the rollbacks while e-commerce outlets battle for eyeballs.
"Given the competitive nature of the holiday season and the fact that consumers are expected to be cautious with their spending, retailers knew going into the holiday season they would have to offer unique and attractive holiday promotions," Kathy Grannis with the NRF told MainStreet. "We've seen a promotional atmosphere for a few years now, thanks to the economy."
Better than one-third (37%) of respondents to Deloitte's recent survey of holiday spending still prefer to shop in a physical store, rather than online. And while 66% of shoppers plan to shop locally at independent retailers or boutique shops instead of national chains, those local stores will account for only one-third (34%) of consumers' total holiday budget.
Bob Phibbs, CEO of upstate New York-based consulting firm The Retail Doctor, agrees that the aggressive retail discounting trend is significant – but nothing new.
"Best Buy recently announced they are lowering prices and Wal-Mart and many others are price-matching," Phibbs says. "No one wants to get caught like they did in holiday 2008, so most retailers are running much leaner. I wouldn't say aggressive discounting is new, for many it is a race to the bottom to try to snare wallet share before another big box gets it."
Recent Bloomberg research revealed the food chain of big box bargains on a basket of 87 toys. On November 14, Wal-Mart's prices were 2.4% lower than at Target, 5% less than at Kmart and 7.2% lower than at Toys "R" Us.
But even more telling: Amazon's prices were 3% lower than those available online from Wal-Mart.
Even Black Friday may be a disappointment for traditional retailers. Nielsen's Holiday Spending Forecast says that 85% of consumers this year plan on skipping the stores on Black Friday. Yet nearly half of consumers (46%) say they will shop online this Cyber Monday.
"The big boxes are all looking at omnichannel promotions -- Macy's in particular has done a great job of leveraging their stores as distribution centers and have seen sales rise," Phibbs says. "The reality is that Black Friday as a single shopping day is dead. Online retailers have been discounting since October and many others have announced their discounts this week. Instead of 'let's go to the store and see what we find,' retailers are allowing customers to essentially cherry pick their deals -- which defeats the purpose of having the deals to begin with -- to get people in the door and buy more products not on sale to make up for lost margin."
"Showrooming" has become a popular strategy for nailing the best deals. Shoppers check out items in a store, and then buy them online. Gallup reports 6% of Americans did just that while shopping earlier this month. Another 3% say they intend to buy merchandise online after an in-person inspection at a store. That means brick-and-mortar retailers could be losing nearly 10% of sales to showrooming.
But Phibbs says that shopping tactic can work both ways.
"There have always been shoppers who have gone into a store and said, 'I'll look around' then go to a competitor," he says. "Now they do it in store. At the same time, we are finding Millennial shoppers 'webrooming' where they look online and shop in-store. The reality is if you don't provide an engaged and engaging shopping experience in your store, there are plenty of other places customers can buy your products -- so it is yours to lose. Quite simply, there are too many places to buy too much of the same stuff."
--Written by Hal M. Bundrick for MainStreet