By Michael Rudnick
AGOURA HILLS, Calif.–Santa is coming a bit early this year as retailers are cutting prices sooner in the season due to fears of potentially soft holiday sales.
"Retailers are trying to have leaner inventories then ever because they are concerned about the depth of holiday shopping," Stevan Buxbaum, executive vice president of Buxbaum Group, a retail liquidator, turnaround investment firm and consultancy, told HFN. "This will be a season when retailers are willing to chase inventory rather then sitting on a bunch of stock that they will take a markdown on."
Buxbaum cited early October starts at J.C. Penney and Wal-Mart. "Already we are seeing J.C. Penney and Wal-Mart in October taking price cuts on thousands of items," he said. In comparison, the majority of retailers in 2006 held off until after Thanksgiving on discounting efforts, he added.
He also said that home furnishings items especially hard-hit by this early round of price reductions include furniture, electronics and smaller gift-type items such as housewares, small appliances, kitchen gadgets and seasonal soft home items such as top-of-bed.
The increase in gift card usage has also driven retailers to offer price cuts weeks prior to "Black Friday." Buxbaum explained that gift cards tend to result in delayed buying: Consumers that receive gift cards are more likely to redeem them at retail in January following the close of the holiday season. These consumers generally seek out new merchandise for the spring season rather than holiday inventory, he said. This forces retailers to step up efforts to push holiday inventory out the door at a faster pace.
Early discounting does not necessarily imply deep discounting. "Early-stage discounting can go at 10 percent and 20 percent. They don't need to go at 40 percent and 50 percent right now," Buxbaum said. Deeper discounting is generally reserved for later in the holiday shopping season.