- Retailers are challenged this season to attract holiday shoppers who are holding out for lower prices and other spending incentives.
- If that happens, promotional events such as Black Friday and Cyber Monday may become more important.
- Companies are trying to create a sense of urgency with limited-time discounts, eye-catching products, and free events.
Target hosted a free “Winter Wonderland” event in New York City to showcase the holiday season’s most popular toys. This is an example of retailers making extra efforts to motivate shoppers.
Melissa Repko | CNBC
NEW YORK CITY — On a recent weekend, long lines of families with strollers and young children formed in downtown Manhattan to enter Target’s “Wonderland.”
Santa’s helpers handed out free cookies. Mario and Luigi from Nintendo’s video game “Super Mario” took a photo. A toy train snaked through a miniature village made from the retailer’s Gingerbread kits. And kids rolled their eyes at some of the season’s most popular toys, including the giant Barbie Dream House.
It was one thing to have people come. Turning an event into a sale is a completely different story.
Target’s pop-up events in Dallas and Los Angeles show the retailer is doing everything it can to get shoppers to open their wallets this holiday season. Caution and uncertainty color the outlook for the peak shopping season, as inflation, rising interest rates, student loan repayments and consumers’ focus on experiences weigh on shoppers’ gift and décor budgets.
Holiday spending is expected to increase more slowly than in recent years as customers look for deals. Holiday sales are expected to increase 3% to 4% in November and December from a year ago, according to the National Retail Federation. That’s a significant drop compared to the pandemic years, but about the same as the pre-pandemic average growth rate of 3.6%.
Over the past two weeks, many retailers, including Walmart, Nordstrom and Target, have said shoppers are cutting back on store visits, postponing big purchases or holding out for better deals. This week, Lowe’s, Best Buy and Kohl’s all lowered their sales forecasts. Even some retailers that raised their outlooks, such as Dick’s Sporting Goods, cited trends outside of their control that could constrain spending.
Marshall Cohen, chief industry advisor at market research firm Circana, said this year would be a “mixed Christmas” for retailers.
Average credit card balances are at their highest in 10 years. Fall weather was unseasonably warm in many parts of the country, delaying the need to buy new sweaters and winter coats in the spring. The steady start of Black Friday sales at many retailers, which began in early November, has also slowed the rush as some shoppers believe the best deals are yet to come.
According to the market research firm formerly known as NPD Group, early holiday sales have been slow despite many early promotions coinciding with Amazon’s Prime sale event in October and Black Friday sales starting in November. is late. According to Circana research, holiday shoppers’ spending from mid-October to mid-November was down 7% in dollars and 6% in units compared to the same period last year.
“Consumers are kind of hesitant,” Cohen said.
This delay in spending will put pressure on retailers for the rest of the season. That’s led retailers like Target to do whatever they can to generate demand this year.
“You need to create an impulse,” he said. “You have to create a sense of urgency and create a desire to buy.”
On November 14, 2023, Barbie® dolls will be on display and sold ahead of Black Friday at the Walmart Supercenter in Burbank, California.
Tama Mario | Getty Images News | Getty Images
The biggest themes this holiday season are: Shoppers are hungry for deals and are willing to wait.
Walmart Chief Financial Officer John David Rainey said in an interview with CNBC last week that customers are holding out until they feel they can get the lowest price.
“We know that consumers are heavily biased toward events and promotional periods,” he said, adding that “some periods around events and promotional periods are weak.”
Walmart’s sales in the last two weeks of October were lower than in the remaining three months, a sign that could be concerning for consumer health, Rainey said. Still, he said sales started picking up again in early November as Walmart launched its Black Friday sales.
Footwear company Steve Madden has seen a similar move. Chief Executive Officer Edward Rosenfeld said on an earnings call in early November that the only time customers show up in a big way is when there are promotions.
“Shopping patterns are becoming more and more event-driven,” he said, adding, “The valley in between is getting a little bit deeper.”
He said the company expects “customers to really show up” as major shopping holidays like Black Friday and Cyber Monday begin.
Lowe’s and Best Buy are also aware of the deal-seeking psychology. Both companies lowered their full-year sales forecasts after third-quarter results fell short of expectations.
Lowe’s CEO Marvin Ellison said shoppers are putting off bigger projects and big purchases like new refrigerators.
To combat this, hardware stores have rolled out deep discounts on appliances and launched new lowest price guarantees, Ellison said.
“We’re going to continue to offer great offers throughout the holiday season, starting this week,” he said on a call with CNBC. “So there’s a lot of effort being put into creating a little bit more urgency around getting customers to come in for the holidays.”
Best Buy’s discount levels have increased since last year and are even higher than before the pandemic, CEO Cory Barry said on an earnings call with investors. He said the company expects the season to be punctuated by moments when shoppers believe they can get the lowest prices.
“As we prepare for a very deal-focused customer, shopping patterns will be different than last year, with customer shopping activity concentrated during Black Friday week, Cyber Monday, and the final two weeks of the year. is expected to more closely resemble the historic holiday period in December,” she said.
Shoppers at Bloomingdale’s stores and on the company’s website will see a collection of purple suit jackets, sequined dresses, gourmet candy and even candy-themed cufflinks inspired by the movie “Wonka.” can do.
Melissa Repko | CNBC
In addition to sales, retailers seek to capture customer attention and generate revenue with special events, limited-time offers, and eye-catching products.
Some retailers, such as Best Buy, are dangling short-term sales to entice shoppers to hit the “buy” button. The electronics retailer has debuted Best Buy Drops, a flash sale event through an app that offers short-term discounts on limited edition items and popular product releases.
Target, Ulta Beauty, and Sephora, an LVMH company, are offering “Deal of the Day” discounts on popular brands and gift items for 24 hours only.
Other companies try to attract shoppers by offering fun and free experiences. Because it is betting that it will increase the consumer’s desire to purchase.
Macy’s has a special collection of Disney merchandise for the holiday season. Customers can also virtually try on Disney princess dresses in the Magic Mirror at the company’s flagship store in New York City.
Macy’s
At Macy’s flagship store in New York City’s Herald Square, shoppers can view an augmented reality-powered “magic mirror” before purchasing a special collection of Disney jewelry, toys, apparel and more available online and throughout the store. You can spin around wearing a Disney princess dress.
In mid-December, all Macy’s stores will host beauty-themed events with DJs, free makeup, and fragrance bottle sculptures. All stores have stations where customers can create their own beauty gift sets.
Nata Doville, chief merchandising officer, said that through special events and seasonal exhibits, the department store wants to “introduce an element of retail entertainment” and “create a bit of a party atmosphere on the floor.”
Macy’s upscale department store Bloomingdale’s carries a colorful collection of chocolates, candy-themed cuffs, purple blazers and sequined dresses inspired by the Wonka prequel, which opens in December.
Chief merchandising officer Jamie Nordstrom said Nordstrom is trying to attract shoppers with additional incentives and more convenient options as foot traffic is expected to decline. Holiday shoppers can earn extra reward points on beauty purchases. The company has also just launched free his two-day shipping to all customers in over 20 markets.
He said Nordstrom can stand out with popular brands, great customer service and fast shipping during a stressful season.
“The faster we can get products to customers, the easier their lives are,” he says.
Across the industry, retailers are hoping that novelty and flash will encourage reluctant consumers to spend more than ever before.
Target is trying to emphasize convenience and newness along with value this year.The company’s ‘Wonderland’ pop-up showed off the chain’s appeal A popular toy during the holiday season. Children can scan their favorites and compile them into a shoppable wish list that parents can print or email to themselves.
Melissa Fleury, 27, of Brooklyn brought her 1-year-old daughter and 4-year-old nephew to the event. But so far, she says she hasn’t done much holiday shopping.
“Usually, I’m half done with the list,” she said.
She said she cut her gift budget from $1,000 last year to up to $800 this year. She continues to record her highest sales by exchanging tips with her aunt and her sister. And she spends slowly, deliberately, and only when she finds a deal, she said.
“The price has to be right,” she said.
— CNBC’s Robert Hum contributed to this report.