The Customer Is King
Promotions to Drive Lower Retailer Margins During Holiday 2017
The BRG holiday forecast, based on proprietary research and its own recent survey of over 100 retail executives, predicts another year of moderate year-over-year sales growth at 3.5%, coupled with significantly lower retail margins resulting from aggressive promotional activity during the 2017 holiday season. The impact of lower margins will put more stress on many already challenged retailers as the 2017 holiday season will likely generate less cash flow than what was achieved in 2016.
Year-over-year holiday sales increases since 2010 have remained fairly consistent in the 3.0% to 4.5% range, and we expect to see holiday sales increase about 3.5% this year. What makes 2017 particularly interesting is the potential for greater levels of promotional discount activity by retailers. We are predicting that retailers’ margins, which are critical to driving cash flow, will be substantially lower in 2017 due to aggressive discounting and pricing. Our forecast of lower margins is critical because retailers stand to suffer a substantial impact to gross margin performance and ultimately cash flow during the critical fourth-quarter sales period.