US shoppers set for cheapest holiday gift season in years
FILE PHOTO: People shop at the Shops at the Oculus and Westfield Shops during Black Friday shopping in New York City, U.S., November 24, 2023. REUTERS/Brendan McDermid/File Photo
The battleground for retailers this US holiday season is over merchandise priced at $35 and less, setting the stage for the cheapest holiday shopping period in years for TVs, dresses, toys, and sporting goods, according to retail executives, federal pricing data, and an exclusive analysis of early Black Friday discounts.
Toys, games, and hobby gear are on track to be less expensive this holiday season for the first time since 2020, while sporting goods prices are down this holiday for the first time since 2018, data from the Bureau of Labor Statistics (BLS) showed.
The price of a TV is three-fourths of what it was in 2019, while men’s suits, outerwear, sports coats, women’s dresses, and audio equipment are 8 percent to 14 percent cheaper compared with pre-pandemic levels, BLS data for October shows.
Consumer prices are falling after pandemic-induced kinks in the supply chain and a huge shift in demand toward goods over services over the past two years pushed up prices for nearly every consumer good, from eggs and butter to Barbie dolls and tennis rackets.
Walmart said prices of general merchandise—clothing, electronics, furniture—had declined by low to mid-single-digit percentages versus last year, enabling the retailer to cut prices this holiday season.
Target executives said they have seen inflation moderate, but that it’s still a very “rational environment.”
“If there’s one thing that we’ve seen is in an environment where people are making choices and they might have some constraints with their budget, the motivation to buy is, really, is this going to add value to my life?” Target chief growth officer Christina Hennington said on a call last week.
This year’s holiday deals
Black Friday discounts are 30 percent to 50 percent at major retailers and could go deeper later in the season. Many shoppers may wait until the weekend before Christmas Monday to buy their gifts. Retailers could deepen discounts by 10 percent, analyst Jessica Ramirez at Jane Hali & Associates said in an interview.
“We are definitely seeing signs that the consumer is starting to pull back… and businesses know that,” Jeffrey Roach, chief economist at LPL Financial, said in an interview. “So they’re putting their best foot forward by trying to put fairly aggressive discounts.”
Walmart’s Black Friday deals on dolls, Lego sets, winter clothing, baby products, and Christmas decorations were priced at or below $35.
Target said it would sell more than two-thirds of its holiday-season toy collection at or below $25 and a similar amount of its holiday decorations at or below $30. Toys, including Barbie dolls, were priced below what they sold in 2019.
For example, a Barbie doll Clinic Play Set was selling for $32.49 on Target’s website on Wednesday. By contrast, on Dec. 3, 2019, and Nov. 18, 2021, the playset was selling for $45, according to a Reuters check on the Wayback Machine internet archive.
On Walmart, a Lego classic creative brick box was selling for $22.49, compared with $27.99 on Nov. 20, 2019, the day before Thanksgiving.
In the weeks leading up to Black Friday, retailers, including Macy’s, Dick’s Sporting Goods, and Lowe’s, have extended price promotions to a broader range of categories than last year, according to Jane Hali & Associates.
At Macy’s, deals this year included 50 percent to 65 percent off on coats and dinnerware and up to 50 percent off on handbags, small appliances, and men’s shoes. The department store chain had 12 promotions under its “Black Friday Early Access” sales event in the week of Nov. 8, compared with just four last year.
An analysis of inventory data by Reuters found that Macy’s and many other major chains, including dollar stores, are struggling with slower inventory drawdowns.
Major e-commerce platforms Temu and Shein have also jumped on the deals bandwagon, engaging in a “value for money” frenzy, triggering a race to the bottom.
Kevin Simpson, chief investment officer at Capital Wealth Planning, said Walmart, Target, and Home Depot are showing signs of caution when it comes to consumer health, and may expect poorer earnings reports once the season ends.
For two years, “retailers have been in a Goldilocks world” of increasing sales despite price hikes, he said. “But you can only do that for so long.”
He expects retailers to dangle bigger discounts this year. “You’re going to see margin compression and potentially lower sales,” said Simpson, whose firm holds shares in Walmart and Home Depot.
