Retailers Plan to Offer Less Aggressive Discounts this Holiday Season - But Is It Sustainable?

Thanksgiving is just around the corner, which for many of us, means that the clock will soon begin ticking for our holiday shopping. Though many consumers have already begun to take advantage of early-season promotions and layaway programs, others are still waiting until the “official” beginning of the holiday shopping season to start buying. So, what kinds of promotions and discounts can we expect as consumers ramp up their purchasing in the weeks ahead?

According to the latest results from our 10th Annual Retail Compass Survey of CMOs, retailers generally expect to follow their 2014 playbook for holiday season discounts. Our study found that nearly four-in-five retail CMOs plan to offer levels of promotion consistent with last year. These retailers are likely hoping to capitalize on modest improvements in consumer confidence over the past 12 months while remaining cognizant of continued price sensitivity among customers who have been chastened by years of economic recession.
However, when thinking about the industry at large, CMOs still anticipate heavy discounting overall this year, with 70 percent expecting to see an uptick in promotions across the sector. Despite their desire to avoid diluting their brand and further squeezing their margins and this season, retailers should remain prepared to adjust their discounting strategy in response to competitive pricing pressures and the need to rightsize their inventory.

When it comes to balancing brick-and-mortar and online promotions, the retailers we surveyed appear to be targeting their efforts to the in-store experience. Thirty-eight percent of CMOs say they will focus the majority of their deals in-store this year, while another 41 percent will focus equally in-store and online. Exclusive in-store discounts, cited by 45 percent of CMOs, remains the leading promotional tactic for retailers hoping to draw shoppers away from phones and tablets and into stores. In terms of online promotion, free shipping continues to be the most frequently cited tactic among CMOs (27 percent). However, as digital analytics around customer acquisition grow increasingly sophisticated, retailers are also directing more dollars toward search engine marketing, with 24 percent of CMOs citing search engine optimization as a major area of investment—up from just 6 percent last year.

And what of Black Friday and Cyber Monday? As our survey uncovered last year, the once-critical Thanksgiving Weekend shopping holiday continues to diminish in importance as retailers begin offering deals and discounts earlier in the year and spread them out across many months. As a result, retail CMOs have modest expectations for Thanksgiving Weekend sales, forecasting a 2.4 percent increase in Black Friday sales and a 2.9 percent increase in Cyber Monday sales. However, the percentage of CMOs expecting sales boosts on both days has grown. Forty-one percent of retailers expect their Black Friday sales to increase this year, compared to 30 percent last year. Meanwhile, nearly one-in-three (32 percent) of retailers project Cyber Monday sales to increase in 2015, compared to only 20 percent of retailers who felt the same level of optimism in 2014.

Stay tuned to our blog for more insights from the 10th Annual Retail Compass Survey of CMOs, including insights into omnichannel and mobile trends this holiday season.