Macy’s Digs Deep With Discounts

When setting discounts, retailers always have to weight the benefits of increased foot traffic against the potential for losses if the price point is too low or they simply sell too much. However, this holiday shopping season is throwing a wrench into that tried-and-true highwire act.

Instead of putting an upper limit on discounts, Forbes explained that Macy’s has turned the promotional deals offered in stores across New York City up to 11. Contributor Walter Loeb noticed that high-end cashmere sweater collections at Macy’s had been discounted up to 70 percent in some cases, and shoppers could use their store cards or mobile passes to put an extra 20 percent on top of that. The purchase of any denim product gets shoppers a $10 savings card. Even chocolate — an item Loeb explained shoppers usually don’t go for unless they’ve run out of ideas and time on Christmas Eve — comes with a 20 percent discount.

This reliance (or overreliance) on discounts has put Macy’s in a peculiar position. While the retailer may have made the decision to carpet bomb its stores with deals and promotions to improve foot traffic, the National Retail Foundation explained that it’s not actually a dearth of holiday shoppers that Macy’s should be worried about. The NRF noted that customers are actually purchasing at a fair clip, leading to increased unit volume. However, Macy’s negative feedback loop means that the increased sales due to discounts require even more sales to recoup the cost lost to the deals.

It’s an odd situation that Macy’s finds itself in and certainly not one that can sustain itself after the holiday shopping season, as customers curtail spending. However, so close to Christmas now, the retailer may have no choice but to double down even further with discounts and take stock of the damage after the new year.