Retailers prepare for post-Christmas discounts, gift returns
Christmas is in the rearview mirror, but there’s still no rest for retailers expecting yet another day of intense crowds Thursday.
The post-Noel mall scene this year won’t just be marked by the annual stream of returns from dissatisfied gift recipients — there also will be earlier opening hours and deeper discounts from stores hoping to clear their inventory and pad their revenue before the end of the year.
Data firm ShopperTrak predicts that the after-holiday crowds will be the fifth-largest of the year. Nearly 8 in 10 consumers surveyed for digital coupon marketplace RetailMeNot said they plan to shop year-end sales after the holidays.
Brenda Herrington said she would be one of them. With her teenage son at the Baldwin Hills Crenshaw Plaza two days before Christmas, the Crenshaw resident said she would return after the holiday to buy gifts for people with January birthdays and to stock up on discounted holiday decorations for next year.
“We always come back for after-Christmas shopping because there’s better deals,” Herrington said.
Shoppers have been stressed for months by high unemployment, the government stalemate and the shortest Thanksgiving-to-Christmas season in a decade, analysts said.
Wage gains have been minimal and most new jobs this year were created in low-paying industries such as food service. Healthcare bills are weighing on wallets. Purchases of small items have taken a hit as consumers gravitated toward big-ticket goods such as homes, electronics and autos.
“There will be pent-up demand post-Christmas — consumers have been really cautious with their spending going into the holiday,” said Michelle Bogan, a partner at consulting firm Kurt Salmon. “They’ll wait and see what gifts they received and then they’ll be tempted to go out and spend a bit on themselves.”
Wal-Mart, which expects Thursday to be one of its busiest shopping days of the year, said it is offering 25% to 50% off on thousands of items.
Toys R Us will open for 14 hours from 8 a.m. until 10 p.m. on Thursday, then for 13 hours on Friday and Saturday and 12 hours on Sunday and Monday.
JCPenney will welcome visitors at 7 a.m. after Christmas, offering door-buster prices until 1 p.m. To keep patrons coming, the retailer is giving out coupons for $10 off $25 through Saturday.
Online apparel retailer Lulu’s launched its end-of-the-year sale, including a barrage of 70%-off items, on Wednesday. Amazon began advertising its own year-end deals earlier in the week, urging shoppers to “get a head start on next year’s shopping” with discounts and clearance prices through New Year’s Eve.
The promotions continue a trend of heavy holiday discounting that began in early November, according to Mark Weinsten, senior managing director at FTI Consulting.
“The markdowns will be higher this year than they were last year because they started earlier and deeper,” he said. “Markdown cadences tend to become more aggressive, not less.”
The Black Friday bonanza weekend was weak. Super Saturday sales during the final weekend before Christmas suffered a 3.1% year-over-year revenue slide, ShopperTrak said. Many bricks-and-mortar chains will end up with excess inventory, Weinsten said.
Strong online sales will force physical retailers to stay competitive by dropping prices even more, analysts said. And the dearth of hot new fashions and products — except for the recent Nike Air Jordan sneaker launch and a smattering of video game consoles and beauty products — has put a damper on sales.
Retailers are “now in inventory management mode rather than sales growth mode,” NPD Group analyst Marshal Cohen wrote in a blog post.
But severely slashed prices throughout December could have a damaging ripple effect.
“Not only could this be a problem for next Christmas, but it will also likely be a problem for spring, as shoppers will no doubt balk at paying anything near full-price again after just having had their pick of merchandise for half-off,” RBC Capital Markets analyst Howard Tubin wrote in a note to clients.
Gift cards could be a saving grace for retailers, with sales projected to reach a record $28.9 billion over the holiday season, according to Ken Perkins of Retail Metrics. The value of the sales isn’t recorded until the cards are redeemed, so retailers are pushing consumers to use them up on post-Christmas bargains.
But the gift card boost could be tempered by the effect of returns and unsold overstock items.
Waylaid by lackluster sales, many bricks-and-mortar chains will have to send extraneous inventory to processors such as Liquidity Services. The company, which said it receives unwanted merchandise from seven of the country’s top 10 retailers and e-commerce sites, also noted that heavy online traffic this year will probably push up returns.
Electronics are the most returned item, followed by apparel, according to Liquidity, which said that nearly $60 billion worth of gifts will be sent back to retailers this year.
Separately, RetailMeNot’s survey found that more than 40% of all shoppers said they will be returning at least some winter gifts. Data from Kurt Salmon suggests that about a third of items sold online are returned.
Then there’s the problem of return fraud, which is expected to cause retailers $8.76 billion in losses this year — $3.39 billion of it during the holiday season, according to the National Retail Federation.
This year, about 5.8% of returns are expected to be fraudulent — up from 4.6% last year, according to the trade group. Criminals have been known to return used or stolen items, buy products with fake tender or use counterfeit receipts to return merchandise.
But what concerns retailers the most is the prospect of shoppers not showing up.
Before Christmas Eve, Ortencia Guzman, 72, left the Macy’s at the Baldwin Hills Crenshaw Plaza with a bag full of merchandise. The off-and-on baby sitter has put the kibosh on making more purchases after the holiday.
“Things are really expensive right now and the economy is tough, at least for me,” she said. “I already bought all I could, all I had money for.”
Twitter: @tiffhsulatimes, @james_barragan
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Twitter: @tiffhsulatimes, @james_barragan
