Retailers cautious this holiday season to avoid excess inventory
NRF projects consumer spending to grow between 3% and 4% over holiday season
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Retailers planned conservatively with inventory this holiday season and are simultaneously offering numerous deals throughout the season to avoid another year of excess stock.
Companies last year were saddled with too much inventory after the holiday season, forcing them to issue more deals to clear shelves.
"After three years of ups and downs with the impacts from COVID and the excess inventory experienced last holiday, I think retailers took what they learned and implemented it in their product buys this year," Lauren Murphy, retail finance director at Wells Fargo, told FOX Business.
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This year, most retailers "were a bit more conservative and cautious with the amount and selection of product for the holiday season."
Black Friday Shopping in Soho. (Thomas Iannaccone/WWD/Penske Media via Getty Images / Getty Images)
Gerald Storch, the former CEO of HBC and Toys R Us and founder of Storch Advisors, told FOX Business that this will be one of the slowest holiday seasons in recent years as consumers curtail discretionary purchases.
Mark Mathews, executive director of research at the National Retail Federation, said the industry is projecting that spending will grow 3% to 4% over the holiday period, which is slower than the past three years when stimulus checks led to unprecedented rates of retail spending.
However, it is in line with the average annual holiday increase of 3.6% from 2010 to 2019, according to the NRF.
Not only are shoppers getting hit by rising interest rates but also with "several years of compounding inflation, less government stimulus and rising consumer debt burdens," Storch said.
But this wasn't a surprise to companies.
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"Most retailers understand this and have been extra careful when placing holiday orders, so I don’t expect the magnitude of inventory problems we’ve seen in recent years," Storch noted.
A shopper carries a Target bag in San Francisco, California, on Nov, 29, 2022. (David Paul Morris/Bloomberg via Getty Images / Getty Images)
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Despite planning more cautiously to gain more wallet share, retailers have also been implementing marketing tactics to draw in the consumer earlier in the season with early shopping deals and Black Friday promos running in early November, according to Murphy.
Deals will continue throughout November and December, too.
There is still pressure "to drive traffic with promotions so they don’t get caught with excess inventory if their holiday sales projections don’t materialize," Murphy added.