Retailers in North America are offering bigger and bigger-than-usual Black Friday deals due to excess inventory and recession fears.
After struggling to keep shelves stocked due to global supply chain disruptions during last year’s holiday season, the retail industry has reached the other extreme, with warehouses now piled up with merchandise. Companies are under pressure to reduce that inventory before the end of the holiday season, when consumer malaise is likely amid high inflation and a slowing economy, said Kostya Polyakov, national industry leader for consumer and retail at consultancy KPMG.
“Retailers really need this holiday shopping period to hit well for them,” Mr. Polyakov said.
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For shoppers, that means extra-generous promotions and a wider selection than usual at discount outlets, as retailers offload more of their merchandise there. But while the deals started earlier and are expected to last well beyond the usual Black Friday period during this holiday, logistical headaches could lead to delivery delays, and shipping surcharges due to higher fuel prices pass on to consumers. will reduce some of the savings.
Walmart Inc. WMT-N, Target Corp TGT-N, and apparel giant Gap Inc. GPS-N is among the retailers saying they are working through an inventory glut. And while publicly available data on stockpiling goods in Canadian warehouses is particularly scarce for sectors like apparel, experts see evidence that retailers north of the border are grappling with similar challenges.
In Hudson’s Bay Co., for example, shoppers are already getting online discounts of 50 percent and more, which is unusual this early in the season, said Lisa Amlani, principal and founder of the consulting firm Retail Strategy Group.
The overstock issue also means that overstocked merchandise is turning up at discount retailers, a boon for cost-conscious shoppers looking for coveted brands.
Off-price retailer TJX Cos. Inc. “The marketplace is absolutely flooded with quality branded merchandise,” TJX-X Chief Executive Ernie Herrmann said in an earnings call on Nov. 16. Canada.
Ms Amlani said that across the board, discounts are likely to be particularly deep for big-ticket items, for which demand spiked earlier in the pandemic.
For example, consumers who rushed to buy desks, laptops and tablets for remote work and online learning amid COVID restrictions may not need to replace those items in the near term. But retailers have bought more office furniture and consumer electronics, according to Ms. Amlani. Other popular pandemic purchases for the home, such as TVs, mattresses and appliances, are also likely to be available at extra-large markdowns.
The irony is that the holiday discounting bonanza is partly due to inflation. Many retailers underestimated consumer demand and were taken aback by the impact of rising prices on shoppers’ wallets and sentiment this year.
In addition, many retailers brought out holiday merchandise earlier than usual in an effort to offset last year’s supply chain delays, she said. The result has been an oversupply of products in warehouses and store stockrooms.
Fortunately for retailers, people are still flocking to shopping malls and filling their digital carts despite inflation, rising borrowing costs and a recession. Ms. Amlani said, but the economic woes and gloom that gripped this holiday season have created a shift in consumer demand, with shoppers now more likely to shop using credit, and sales focused on .
Still, while the deals will last well after Black Friday and Cyber Monday, anyone hoping to get gifts under the tree in time for the holidays will want to account for the extra time this year. While backlogs at ports have reduced, labor shortages mean it may take longer than usual to offload goods. Mr. Polyakov recommended that shoppers add a buffer of one to two weeks to retailers’ promised delivery times.
Canadians may also want to factor the shipping fuel surcharge into their holiday budget. Surcharges for Canada Post and other major delivery services for domestic delivery stood at about 40 per cent as of the end of November.
Ms. Amlani said buyers may want to pay extra attention to the return policy this year.
With retailers eager to reduce inventory, rules for sending back unwanted gifts could become more stringent this year.
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