Retail Execs Say Promotional Pressures Won't Ease This Season

Role as holiday sales driver will only increase

November 16, 2017

Pricing pressure has been a driving factor during the holiday season, and that doesn't appear likely to change in 2017.

Almost two-thirds of retail executives expect promotions to play a more significant role in overall sales this holiday season, according to survey by Berkeley Research Group (BRG), while a mere 3% expect to see fewer promotions.

Interestingly, the October 2017 survey found that execs at department stores were considerably less likely than those in other sectors to predict heavier promotional activity—though even among this group more than a third expected an increase, compared with just 8% who expected less.

The poll parallels the cautionary note sounded by Target executives in their Q3 earnings call Wednesday. “We enter every holiday season knowing that it will be highly competitive and promotional,” CFO Cathy Smith said. “We expect to see continued pressure on our gross margin in the fourth quarter.”

BRG outlined several factors it expects will keep promotional pressure high this holiday season. Recent warm weather has left retailers with excess inventory, for example. Additionally, retail industry distress led to widespread discounting that, in turn, has fed consumer expectations for heavy discounts. 

Overall, BRG expects holiday sales to increase 3.5% this year. That's above eMarketer's estimate of 3.1% growth but shy of NRF's projection of between 3.6% and 4.0%.

Tree photo credit: Annie Spratt on Unsplash