As shoppers head into the new year, they could actually be spending more than usual on specific items, according to retail data analytics firm DataWeave.
Not only are consumers seeing fewer products being discounted this winter, MSRPs are up an average of 15 percent, Krish Thyagarajan, DataWeave president and chief operating officer told Sourcing Journal. The increase is not a fluke, he said—it’s an indication that retailers expect to see prices remain at an elevated level for the foreseeable future.
DataWeave conducted year-over-year analysis on thousands of fashion, furniture, health and beauty, bed and bath, and electronics products at Amazon and Target, looking into the pricing of about 1,000 SKUs per category. “Our objective was to determine whether prices were on average higher or lower than last year, and to what degree,” Thyagarajan said.
In the fashion category specifically—which encompasses apparel, footwear and handbags—DataWeave saw “a significant dip” in product availability, from over 90 percent in Q4 of 2020 to the low 70th percentile one year later. “This suggests that prices will be higher through the rest of the season as retailers have less to sell,” he said.
Meanwhile, shoppers, sensing scarcity, have changed their discount-driven outlook. “From the consumer’s point of view, it’s better to pay higher price and get the product on time, versus waiting for better prices and missing out altogether,” he said, echoing previous outlooks seeing a rise in prices.
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The shift started before Thanksgiving, when DataWeave observed far fewer deals than the same timeframe last year. “For example, when we looked at the furniture category, we found only 3 percent of SKUs on discount—compared to 26 percent during the same time period last year,” he said. While the price drops are common during the holidays, Black Friday and Cyber Monday bucked the tradition this year, Thyagarajan said. “We observed across categories price increases on around 13 to 20 percent of SKUs, with an average price increase of around 15 percent,” he added.
DataWeave found that the prices of most everyday products were higher during November than the year-ago period. In the bed and bath category, more than 80 percent of SKUs sold at 30 percent higher than the previous year, while more than 50 percent of health and beauty products were sold at a 176 percent increase. “Luxury fashion saw a strong uptick leading to the holiday season as reflected by average price increases as well as the number of SKUs available,” he said.
A DataWeave study earlier in the fall showed that just 37 percent of Louis Vuitton accessories were discounted on Farfetch.com last year, a far cry from the 2019’s 92 percent. This year, no the LVMH-owed brand’s accessories on Farfetch have been marked down.
While many products saw price increases, consumers could still find discounts during the peak season. Thyagarajan believes retailers resorted to deep discounts for the most hard-to-move items.
“A confluence of inflationary trends, product shortages and consumer liquidity has driven this,” he said. The shock to the supply chain motivated consumers to begin shopping for gifts earlier out than usual, meaning that they were purchasing goods at full price rather than risking missing out.
“Retailers have needed to rely much less on across-the-board discounts,” he added, noting that “promotions have been more strategic.” Retailers likely used deeper discounts on fewer products to draw consumers in to buy certain items, he said, “and once they’re there, customers are buying everything else at a non-discount level.”
Government-issued stimulus checks and augmented pandemic unemployment benefits also injected more money into the economy, prompting a willingness to spend. “When these factors once again normalize, we could see a return to the ‘race to the bottom’ that has occurred since the financial crisis of 2008-2009,” Thyagarajan added. However, the fact that retailers were able to maintain pricing power as the holiday shopping season played out likely indicates that MSRPs could remain elevated in 2022.