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Retailers Offer Fewer Discounts as Consumers Seek Last-Minute Gifts

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As the holiday season approaches, last-minute shoppers are reportedly finding that major retailers are offering smaller discounts and fewer markdowns on their products.

The reduction in discounts during this crucial shopping period reflects the challenges faced by retailers due to higher interest rates and other financial pressures that are impacting consumer spending, Reuters reported Friday (Dec. 22).

Data from two firms, Centric Market Intelligence and Vertical Knowledge, reveals a decline in the number and size of price markdowns on key products from November to December, according to the report.

Macy’s, for example, saw a decrease in products with price markdowns from 49% to 46%, while the average markdown dropped from 20% to 17%, the report said. Similarly, Ulta experienced a drop in products on sale from 10% to 5%, with the average discount decreasing from 3% to 2%.

Abercrombie & Fitch and Bloomingdale’s, which is owned by Macy’s, also reduced their average discounts on products during this period, per the report.

The decision to scale back discounts ahead of Super Saturday, one of the busiest shopping days before Christmas, highlights the difficulties retailers are facing, according to the report.

While promotions have traditionally played a vital role in attracting shoppers during key periods, retailers are now looking to buoy profits by reducing discounts, the report said. Additionally, the early start of Black Friday discounts in October has likely contributed to the reduced emphasis on discounts in December.

The decline in discounts may be attributed to the fact that price-sensitive shoppers have already completed their holiday shopping, per the report. As the days leading up to Christmas become more limited, shoppers who have procrastinated are less likely to prioritize cost and are willing to pay higher prices for desired gifts. This presents an opportunity for retailers to recover their margins, especially considering the inelastic demand for last-minute purchases.

PYMNTS Intelligence has found that consumers got off to an early start for the holiday shopping season, turning up in record numbers for this year’s Black Friday weekend.

Shopping with small businesses also resonated powerfully with consumers, who spent an estimated $17 billion on Small Business Saturday this year, according to “How Small Shops Can Win Big: Capturing the SMB Payments Opportunity,” a PYMNTS and American Express collaboration.

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