In its most recent holiday analysis, DynamicAction’s retail index report revealed some eye-opening trends, which include retailers holding more inventory heading into the holiday season this year as compared with last year, and markdowns and promotions are pacing higher year-to-date as compared to last year.
Researchers at the firm said online orders using a promotion are up 2 percent so far this year. And the acceleration is having an effect. Authors of the report noted that “margin impact due to promotions” is up 3 percent year to date.
Retailers are also sitting on more inventory as the industry heads into the holiday shopping season, which is driving the cadence of markdowns and also hurting gross margins. Orders using a markdown are up 5 percent year to date over 2017. In August alone, markdowns were up 18 percent year-over-year — a “red flag” for retailers, the company said.
“Across the board in 2018, grabbing the attention of the digitally savvy new consumer continues to elude North American retailers, who are actively vying for their wallet share with an increased marketing spend,” researchers at the firm said in their analysis. “The misalignment between what customers want and what’s being made available, coupled with an increase in markdowns could have detrimental consequences on customer retention and profit. Gaining a true understanding of customer profitability has never been more important leading into the busiest shopping season of the year for retailers and brands.”
DynamicAction also offered a tip for retailers and brands before the holiday season ramps up to full speed. “Pulling inventory levels into alignment with demand ahead of the holidays will be paramount to driving profitability through the lens of ‘views availability’ — ensuring specific products customers are seeking do not fall into fragmented or out-of-stock levels prior to the holiday season,” the company suggested.