Retailers start preparing for a deeply discounted, down holiday

Inflation has come down significantly, the stock market is more ebullient than it has been in a year, and the latest monthly national retail sales report came in stronger than expected, but retailers don’t expect that to change what is shaping up to be a downbeat holiday spending season in 2023. An early read of peak season order activity shows retailers ordering less and expecting the consumer to be on the lookout for discounts and freebies to entice them to buy more, according to the latest CNBC Supply Chain Survey.

Last summer, big box retailers Target and Walmart surprised the market when they revealed huge inventory builds that led to a period of steep markdowns. Many retailers are still drawing down inventories now as peak season for orders begins. The big box leaders described during recent Q1 earnings reports a consumer that is spending less, and other new CNBC retail surveying indicates that the consumer situation continues to deteriorate. The unseasonable items clogging warehouse shelves have been a problem of varying degrees for all respondents.

“Cleary, inventory and inflation concerns remain top of mind for apparel and footwear executives as we enter peak shipping season,” said Stephen Lamar, President, and CEO, of the American Apparel & Footwear Association (AAFA).

The largest grouping of respondents expect a lower peak season compared to last year, with 21% of those surveyed expecting the level of orders to be the same.

The American Footwear and Apparel Association, National Retail Federation, Council of Supply Chain Management Professionals (CSCMP), and United National Consumer Suppliers (UNCS) were among respondents to the CNBC survey, which was conducted May 24-June 11 among 147 respondents. The survey was in the field during a period of time that coincided with West Coast port labor slowdowns that increased fears about potential inflationary impacts of supply chain congestion, before a tentative deal was reached between port management and the labor union on Wednesday.

Even with inflation down from over 9% last summer to 4% in the most recent CPI reading for May, 71% of those taking the survey said they are concerned the consumer will cut back on holiday spending in response to inflation.

Roughly two-thirds (67%) of those surveyed expect consumers to look for discounts.

Based on the concerns about cutbacks by consumers, 77% of all items being ordered this holiday season are middle-price point items, including jackets.

The majority of items in warehouses are sweaters followed by boots, dresses, and evening purses.

More than half (52%) of orders will be promotional products, like free gifts with purchase.

Only 17% of items ordered are high-end items in apparel, electronics, and memorabilia.

CEOs in the retail sector, from jewelry to fashion, have recently indicated that even though the high-end…