News | BRG press release
BRG Study: Retailers Forecast Increased Promotional Activity This Holiday Season
Research report predicts that retailers’ margins will be substantially lower in 2017 due to aggressive discounting and pricing
BRG released today its 2017 holiday retail outlook report. Holiday sales increases have ranged from about 3% to 4.5% since 2012, and this trend will continue in 2017. This year’s holiday results will be particularly interesting because of the potential for greater levels of promotional activity by retailers.
“Holiday success this year revolves around retailer real-time agility,” said Managing Director Richard Vitaro, co-leader of BRG’s Retail Performance Improvement practice. “As retailers scramble this holiday, the customer is king, meaning more price transparency, greater e-commerce integration and additional promotional activity.”
Promotional activity is essential for driving holiday sales, as consumers are conditioned to wait for discounts when buying holiday gift-list items, putting pressure on retailers to slice already unseasonably low prices. The technology and multichannel options available to consumers, coupled with an extra weekend of holiday shopping, could substantially impact retailers’ margins and profitability during the fourth-quarter sales period.
“The extended holiday shopping season will likely require retailers to concentrate promotional activity on the final two weeks of the season,” said Managing Director Rick Maicki, co-leader of BRG’s Retail Performance Improvement practice. “This, of course, will result in increased execution and complexity costs and will likely lead to further retailer challenges in 2018.”
Many retailers are entering the holiday season with soft sales in the late summer and early fall. Several struggling retailers will be aggressive in their promotional activity, as they seek to clear inventory to generate cash and drive sales.
“The 2017 holiday season will likely generate less cash flow than what was achieved last year,” said Managing Director Keith Jelinek, co-leader of BRG’s Retail Performance Improvement practice. “The impact of lower margins will put more stress on many already challenged retailers.”
The BRG survey and analysis reveal critical findings about the potential for unusually high promotional activity, including:
- 64% of retailer executives surveyed expect promotions to play a more significant role in overall sales during the 2017 holidays.
- Online sales are expected to increase by approximately 15% this holiday season, accounting for nearly half of the increase in retail sales dollars this year overall. The continued impact of e-commerce will push retailers to promote heavily to drive store traffic.
- Even consumable products are likely to see more discounting; 70% of grocery store executives surveyed expect promotions to play a significant role in overall sales growth.
- Electronic retailers’ in-stores sales were down by 5% in 2016, and BRG expects just a 1% increase this year. Retailers in this critical holiday category may need to promote frequently and at deep price cuts to drive traffic in store.