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‘The deals are just horrible’: Shoppers say a lack of holiday discounts has dampened spending

For the first time in years, retailers are raising prices and tamping down promotions, leaving Americans without the big seasonal markdowns they’ve come to expect

Shoppers say they're finding fewer discounts this holiday season. (Josh Reynolds/AP)
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Zarah Reeves waits all year to buy clothes, electronics, cosmetics and dorm furnishings, timing her purchases to the deep discounting so pervasive in the run-up to the holidays.

But this season, brands that once slashed prices 50 to 90 percent starting on Black Friday are sticking to markdowns of “10, maybe 20 percent,” she said. So the 20-year-old Howard University student is buying less, and even made a pact with her best friend to skip Christmas gifts altogether.

“The deals are just horrible,” Reeves said. “I’m looking at these discounts, thinking: That’s it? Never mind.”

The ever-deepening discounts — long integral to a retailer’s survival — are diminishing in the face of rising costs and supply chain challenges, leaving Americans without the big holiday markdowns they’ve come to expect. Prices are higher everywhere, even online, as companies adopt more personalized strategies based on a shopper’s buying history. Analysts and industry insiders say the shift could become long-term.

Clothing brand Express, cosmetics chain Ulta Beauty and big-box retailer Dick’s Sporting Goods are among those that have pulled back on promotions. Bath & Body Works, the mall mainstay known for its “buy 2, get 1 free” deals, is limiting clearance sales and storewide discounts while raising prices on popular items such as candles and “wallflower” heaters.

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“We’ve been able to keep promotion levels at or below where we were in 2020 and meaningfully below where we were in 2019,” Bath & Body Works chief executive Andrew Meslow said in an earnings call last month.

It’s a stark reversal from what consumers have been conditioned to expect in the dozen years since the Great Recession. Retailers’ reliance on flashy promotions to attract shoppers quickly became a “race to the bottom,” particularly among mid-tier brands that tried to outdo one another with “40 percent off everything” sales, said Milton Pedraza, chief executive of the Luxury Institute, a consulting and research firm.

But now, nearly two years into a pandemic that has upended supply chains and made it harder for retailers to secure inventory quickly and cheaply, all of that is changing. Companies “finally see an opportunity to raise prices,” he said. “Brands haven’t had a window like this in a long time, so they’re cutting back on any sort of promotion, discount or reward.”

Analysts say retailers have become more discerning in the types of products they mark down, and by how much. This season’s discounts, which range from 5 percent to 25 percent, are markedly lower than the historical average of 10 percent to 30 percent, according to Impact Analytics and Cowen & Co. Many stores have “the lowest level of clearance goods in five years or more,” Cowen analysts wrote in a recent research note. At Macy’s, executives said promotions across the industry hit a “historical low” in 2021.

“Consumers have gotten used to deeper and deeper discounts but as we’ve emerged from the pandemic, you’re just not seeing those discounts anymore,” said Nela Richardson, chief economist for ADP. “Demand is so high that they’re just not necessary.”

The scaling back comes at a time of sustained inflation. Overall prices have jumped 6.8 percent in the past year, according to Commerce Department data, and major consumer goods brands such as Procter & Gamble and Mattel recently raised prices, citing higher costs for materials and shipping. Meanwhile, e-commerce prices are up a record 3.5 percent from last year, according to the Adobe Digital Price Index.

Yet consumers, so far, have continued to spend: Retail sales spiked 1.7 percent in October, even as Americans expressed concerns about escalating inflation. That momentum is expected to continue into November (numbers are scheduled to be released Wednesday), when economists expect retail sales to rise another 1 percent. But there are growing signs that families are being affected by higher costs: 1 in 4 consumers said rising prices had eroded their living standards in November, according to the University of Michigan Consumer Sentiment Index.

In Philadelphia, Harold Hawk says shopping for his six grandchildren has become “abysmal.” The PlayStation 5 his grandson has wanted since last Christmas is still sold out. He was eyeing a new hat from the St. Joseph’s University bookstore for himself and his grandchildren, but the only promotion being offered is free shipping on $75 purchases, he said.

“In past years they had great discounts,” said Hawk, 70, a retired private investigator. But this year, “everything is feeling overpriced.”

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GridPlus, an Austin-based manufacturer that sells $400 cryptocurrency hardware wallets, scrapped all holiday discounts this year. Shipping costs have ballooned tenfold since 2020, and the wait for new products has stretched from a couple of weeks to six months. As a result, the company says it doesn’t have enough products to keep up with a boom in orders.

We know we’re going to sell out no matter what,” GridPlus chief operating officer Justin Leroux said.

Whether the shift away from blanket discounts — such as 20 percent off everything — becomes a long-term strategy remains to be seen, analysts say. But many expect to see more tailored deals, based on a consumer’s buying history.

“To some degree, promotions will return,” Adrian Mitchell, Macy’s chief financial officer, said this month at Morgan Stanley’s Global Consumer Retail Conference. “But we do believe that there is a more permanent shift away from deep, broad-based promotions to much more personalized promotions using data science that’s just much more profitable for our business.”

Analysts say shoppers have generally cut back on impulse purchases during the pandemic, spending instead on targeted big-ticket items like home furnishings, appliances and sporting equipment. A recent rise in online shopping has also given retailers a better understanding of who their consumers are — and how to reach them — than they used to, says Christina Boni, a retail analyst for Moody’s.

“As a result, they can offer more targeted discounting,” she said. “If they know you’ve got three kids, they can send you a back-to-school coupon that will motivate you to come in. And if they know I love golf, why not send me a golf promotion? They can get me to come into the store without putting all golf stuff on sale.”

Yet sales fell during the five-day Black Friday weekend. Shoppers spent an average of $301 on holiday purchases between Thanksgiving Day and Cyber Monday, a 3.5 percent drop from last year, according to the National Retail Federation.

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In the meantime, many consumers say the lack of big discounts has made them more deliberate. Some are forgoing impulse purchases and putting off nonnecessities like big-screen TVs and new sneakers until they find deals they deem worthwhile.

Americans are expected to spend an average of $648 on gifts this holiday season, less than they did the previous two years, according to the National Retail Federation. The trade group forecasts that overall holiday spending will rise as much as 10.5 percent to a record $859 billion this year, though economists say at least some of those gains will be the result of higher prices.

Thai Fong, an actor in Los Angeles, hit up the local outlet mall on Black Friday like he always does. But unlike previous years, when he’d leave with armloads of bags, he bought only two things: an Adidas T-shirt and boxers at the Gap.

“It was kind of unbelievable how bad the deals were,” the 37-year-old said. “I just kept thinking, am I going crazy? Things used to be 70 percent, 80 percent off. And now the best you can get is 30 percent off — which, I mean, 30 percent is great, but it’s nothing special.”