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Study: Retailers to Rein in Holiday Discounting

It may be the season to be jolly, but with retailers likely looking to cut back on promotions this holiday, consumers may not be too pleased about shelling out more on shopping.

In looking at 300,000 women’s apparel products from seven leading retailers for its Holiday Promotion Strategies Report, Upstream Commerce found that retailers could be erring on the side of fewer discounts this season.

The study revealed three things: retailers offered smaller discounts on fewer products last year over the year before, products stayed discounted after the holidays and retailers shifted their strategies for the products they discounted.

Amazon, Bloomingdale’s, Macy’s, Neiman Marcus, Saks Fifth Avenue, Shopbop and Zappos were analyzed for the study, and all but Neiman Marcus offered fewer overall discounts and lower discount rates for the 2014 holiday season.

Zappos displayed the most significant change by nearly eliminating promotions altogether—the retailer discounted 97 percent fewer items and the average discount was down 98 percent. Amazon also showed a dramatic shift, discounting 29 percent fewer products with discounts 40 percent lower, on average during the season.

“In our discussions with fashion retailers, we hear about their constant search for ways to ‘control’ promotions and protect the margins of the higher-end retail stores while diverting part of these price reductions to discount stores (such as Last Call and Off 5th), and the holiday season might be affected by this trend,” the report noted. “If that is the case, then we might see further decline this year in the promotion rate as well as the number of discounted products.”

Only one-third of the products that did get discounted last holiday season were no longer available to buy by mid-January, most of them were, and still at a reduced price. Just 22 percent of the products reverted to their pre-holiday prices, the study noted.

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Bloomingdale’s and Neiman Marcus kept the most products discounted in the new year, while Shopbop had pulled promotions from most of its products by then.

Retailers have started changing the way they select products to discount—it isn’t just those last-of-season leftovers that need to go that have the deals anymore. The study found that the amount of discounted products that were then discontinued fell last year compared to 2013. Amazon, for example, discontinued only 17 percent in 2014 compared to 25 percent in 2013, and Neiman Marcus cut its amount of non-available products from 39 percent to 25 percent.

And analysts noted this isn’t a case of excess inventory created in 2014 that took longer to move because retailers have steadily been investing in managing inventory more efficiently. Retailers may have promoted approaching end-of-life in 2013, but their strategies were different last year.

Consumers will still find something to be merry about, however. Though fewer—and smaller—discounts are expected for the holiday season, analysts at Upstream Commerce said shoppers may see “higher quality” promotions, meaning discounted products will be chosen based on criteria other than end-of-life.

“While that’s good for consumers, it also indicates that retailers are employing more sophisticated approaches in promotion planning,” according to the report. “And, as in previous years, quite a large number of products are expected to still be discounted in mid-January—i.e. you can expect that a substantial part of the promotions will persist past the holiday season.”