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Consumer discount expectation, shopping focus are hitting retail bottom line hard

Consumers have money to spend but they're looking for big items and they're expecting big discounts, and neither scenario bodes well for most retail store operations.

November 16, 2015

Americans don't want or expect to pay full price and their hunger for the lowest price is creating a bit of a revenue challenge for retailers already facing some obstacles this holiday season.

Reports have noted that winter clothing inventory is piling up due to warmer temps across the country, and shoppers while shopping earlier than ever for the holiday gift season are also very keen on ensuring they're getting the best deal possible. Another notable trend is that consumers are opting for big product purchases over everyday clothing items such as shoes.

The results, according to a Business Insider report, is that big retail players including Macy's and Nordstrom are seeing slower store sales and in relation a dip in stock share prices.

"The shift we have seen over the past several years in which consumers have chosen to spend on 'big ticket' merchandise (cars, homes and home renovations, electronics and smartphones) and experiences seem particularly apparent given the results at Nordstrom," Stifel analysts wrote in a recent note, according to BI. " 'The religion of consumption has been proven to be unfulfilling' is an observation that is proving to be particularly true this season," wrote Stifel's analysts.

Overall retail sales only increased by 0.1 percent last month, notes the BI report, and some industry watchers believe all the factors combined may point to another negative economic scenario, akin to the recession three to four years ago.

Yet those retailers being impacted aren’t so keen to agree and believe that the difference this retail holiday season is that consumers have money to spend. They just aren’t spending what they once did in the retail store environment.

Nordstrom co-President and Director Blake Nordstrom echoed a similar sentiment.

"We've said this many times: We're not economists, we're merchants," said Nordstrom Co-president and Director Blake Nordstrom during the company’s earnings call last week, according to Business Insider. "And we concur ... that if you get to a higher altitude and you look at the scorecard, there are a number of economic indicators that look real positive for US and the consumer and spending. Yet all we can tell you is in our business, we saw a slowdown."