Saturday, September 23, 2023
HomeNot All Retailers Are Overstocked for the Holidays. They’re Discounting Anyway.

Not All Retailers Are Overstocked for the Holidays. They’re Discounting Anyway.


Many big retailers are discounting heavily and earlier this holiday season to clear excess stock from their shelves and warehouses. But others, with no substantive overhang of inventory, are also offering bigger sales than usual to satisfy shoppers who have come to expect them.

Retail brands that use promotions as a marketing lever rather than a stock-clearing tool must balance the benefit of acquiring customers through attractive deals and discounts with protecting their brand value throughout the rest of the year. But some are finding that trickier this season, with large companies slashing prices up to 50% before Black Friday had even begun.

“We’ve been in business for 18 years, and it’s the first time ever we’ve gone to 20% [off],” said

Rony Vardi,

the founder of Brooklyn-based fine jewelry brand Catbird, which doesn’t have excess inventory, and until this year usually offered customers a 15% discount around the holidays. “Every email in my inbox is like, ‘60% off,’ ‘30% off,’ ‘50% off’ … 15% just didn’t feel like it was enough.”

Earlier this year, retailers found themselves sitting on too much stock of early-pandemic favorites, such as athletic wear and home goods, inventory built up pre-emptively after last year’s holiday crunch of shipping delays coupled with feverish demand from customers newly freed from Covid restrictions.

Now retailers face a different set of problems: Inflation and consumer uncertainty around the economy, which has damped some spending, and the relaxing of supply-chain bottlenecks, which has left them with excess inventory at the end of the year, said

Vivek Astvansh,

professor of marketing and data science at Indiana University. 

“Last year, the supply was low and the demand was high, and this year it’s the total opposite,” Prof. Astvansh said. “There’s a huge stockpile, which companies are doing those deep discounts to get rid of.”

That mismatch has created what finance chiefs and analysts are calling “a highly promotional environment,” which has already weighed on the margins of some large retailers. And as customers get used to seeing heavier promotions sooner in the year, some companies with no serious overstock are being pushed to discount deeply to keep up with shoppers’ expectations, said

Rod Sides,

vice chair and leader of Deloitte’s U.S. retail and distribution practice. 

“Any discount that doesn’t have a ‘two’ in front of it probably doesn’t get anybody’s attention at the moment,” Mr. Sides said. Savvy shoppers are used to finding ways to get as much as 20% off purchases outside the holidays through online offers such as voucher codes and newsletter sign-up promotions, he added.

In previous years, sneaker-maker

Allbirds Inc.

only dipped its toe into marketing via promotions. Not in 2022, said Chief Brand and Product Officer

Kate Ridley.

The world is different now, and we want to meet people where they are.

— Kate Ridley, Allbirds

“We had one promotional event per quarter this year, just so we could read how customers were reacting and build the muscle of how we show up in those promotional moments,” she said.

The company, which made its name as a direct-to-consumer retailer and went public in 2021, has been running its first “buy one pair, get the second pair for 15% off” deal since early November, and is offering up to 50% off certain items for Black Friday.

“It’s not necessarily based on stock levels, but more based on us wanting to make sure that we’re competitive,” Ms. Ridley said. “The world is different now, and we want to meet people where they are.”

Jennifer Porter,

chief marketing officer of furniture and homeware company

Arhaus Inc.,

told investors this month the company is being slightly more promotional than it was around the same time last year, and has pulled its promotions forward this season in line with other retailers. 

“Looking forward, we aren’t really seeing this as a shift in our promotional strategy for a long-term basis,” Ms. Porter said. “This is more of a reaction to what’s happening in this peak holiday-sales period.”

Not all companies are being pulled into the discounting vortex.

Matthew J. Reintjes,

president and chief executive of coolers and drinkware company

Yeti Holdings Inc.,

this month said on a call with analysts that the company uses the pricing lever sparingly and wants to remain above the promotional fray.

“We like the consistency of our pricing,” he said. “We think that’s a good consumer experience.”

Catbird, a Brooklyn-based jewelry company, is offering customers up to 20% off during the holidays, the biggest discount of its 18-year history.



Backpack and handbag maker Dagne Dover doesn’t have excess inventory to clear out, but is still offering 25% off its products—up from 20% last year.

Deepa Gandhi,

the company’s founder and chief operating officer, said the company determined the size of the discount not in response to the promotional frenzy, but the cost of gaining customers online.

Those “user-acquisition” costs through advertising on some social media platforms have risen in recent years, while Apple’s changes to its mobile operating system have made it harder for advertisers to track users online, Ms. Gandhi said. The company pulled its spending on

Meta Platforms Inc.’s

Facebook early in the year when it didn’t seem to be paying off, she said.

Instead, the company chose to siphon some of its marketing budget over to holiday discounts, rather than ramping up online advertising, Ms. Gandhi added.

“What we are thinking about is that incremental dollar: Is it better to use it to almost guarantee an acquisition by offering money off, or spend it on a Meta platform?” she said. “At this point, we’d rather just give it back to the customer—and for our loyal customers, the promotional times only increase their lifetime value.”

Ms. Vardi, the Catbird founder, said she hopes she won’t have to increase her discount any further.

“No business owner who’s being honest is going to tell you they’re happy to have sales,” she said. “But you just can’t not have a sitewide sale at this point in our culture, it seems.”

Write to Katie Deighton at [email protected]

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