Focus On Promotions, Value Key During The Holidays

As the 2023 holiday season kicks off, consumers will begin their annual hunt for gifts with plans to spend less, which could lead to additional promotions from retailers, said Elizabeth Lafontaine, chief retail analyst with EnsembleIQ, the parent company of Store Brands.

Citing figures from Circana, she noted that nearly half of consumers are planning to spend less this holiday season as compared to 2022 due to higher prices. Additionally, she noted the number of consumers who view the holiday season as a break from reality is down 5% compared to the prior year. Lafontaine shared her insights during Store Brands recent Fourth Quarter Retail State of the Industry Webinar. 

For retailers looking for their share of wallet as consumers tighten their spending, value will be the most important consideration, Lafontaine said. She noted that one quarter of consumers plan to buy all gifts on sale and 23% feel that Black Friday will offer the best deals. 

“This shows consumers are focused on getting the best deals, looking for promotional events and holding their demand for promotional events,” she said.

Additionally, Lafontaine noted retailers will be shifting their promotional strategies, moving away from a focus on price point and instead focusing on “percentage off” as a means of enticing consumers to spend. 

“Retailers are not happy with the prices they are able to give consumers right now. They don’t feel like (the prices) are compelling enough,” she said. “They are trying to train the consumer to think about percentage off versus the amazing doorbuster prices they would get in the past.”

While this year’s holidays will offer a new set of challenges for retailers, there are some that have an opportunity to do well during the all-important shopping season. They include off-price retailers such as Ross Stores, TJX, and Burlington and the private label segment, which has another chance to continue driving sales. 

“The off-price retailers offer consumers that treasure hunt mentality and people are going to see what treasure or special gift they can find,” Lafontaine said. “They are really driving home ‘value’ for consumers.”

With private label, she added, “ Private label brands have become fully fledged brands with true brand identities that mean something to consumers. That really sets them up to do well during the holiday season because there is a lot of great storytelling involved, a lot of pulling on the heart strings with consumers. These brands are uniquely positioned to bring value to the consumer in terms of the prices they are paying, and also make consumers feel that they are getting something special.”

Lafontaine’s full presentation, which includes discussion of the current state of retail and a glimpse into 2024, is available here.