Last year, big chains dialed back on promotions because products were in tight supply due to production bottlenecks and slowdowns at key global ports.
Stores and brands were able to sell merchandise at full price to consumers who had built up savings while staying home during the pandemic and were eager to spend big on their homes and wardrobes.
Conditions have changed in recent months. Some stores are sitting on an excess inventory of goods they ordered from manufacturers months ago with the expectation that consumer spending would be red hot. But demand has softened as consumers feel the pressure from the highest annual jump in inflation since the 1980s.
“Companies chased as much merchandise as possible to support demand, which has now slowed,” Dana Telsey, CEO and chief research officer at Telsey Advisory Group, said in a note to clients Monday. Markdowns and promotions are starting to pick up, she said.
“There is a surplus of inventory … across the board at retail right now,” Urban Outfitters’ CEO Richard Hayne said Tuesday.
Urban Outfitters will increase promotions for the remainder of the year and into the winter holiday shopping season, he said.
Target said it was carrying too many big, bulky products such as furniture, televisions and kitchen appliances last quarter and misjudged how extensive the consumer shift to luggage, toy and home decor purchases would be.
“We didn’t anticipate the magnitude of that shift,” Target CEO Brian Cornell said last week.
Target has been marking down some of those bigger items to make room for products that are in higher demand.
And Best Buy said it, too, has seen an increase in promotions for TVs and computers.
“Some products were even more promotional than we expected coming into the quarter and were similar to pre-pandemic levels,” CEO Corie Barry said Tuesday.
These companies buy up high-end goods for cheap and then turn around and sell them to shoppers at a discount from their original prices.
“The buying environment now is better than it has been for years,” Burlington CEO Michael O’Sullivan said Thursday. “We’re seeing brands that we haven’t seen for a couple of years.”