2010 Discounting Forecast: Retail and Auto
Retailers manage inventory levels and reduce the number of sales
For consumers, 2010 may not look very different from 2009 when it comes to discounts. Companies in the apparel, jewelry, and home furnishing industries are planning to keep their inventories low to cut operating costs, which means fewer large discounts for customers, says
"Consumers right now are still hunkered down, and even though economy is improving, we still have double-digit unemployment and a housing market that is in flux," says
However, there has been some slight growth in spending, especially during the holiday season of 2009. Retailers saw a 2.9 percent increase in sales in December, according to Thomson Reuters. Sales at department stores increased by 0.7 percent, apparel stores increased by 4.7 percent, and discount stores increased by 5.3 percent in December, according to data from Thomson Reuters.
In the auto industry, car manufacturers are slowly beginning to recover, seeing a 15 percent increase in U.S. auto sales in
While retailers may not be discounting as drastically as in the past, Cohen says every business, even luxury retailers, is looking to add some value or discount into the equation in 2010. Here's a breakdown of what type of discounting you will see from the fashion/apparel, jewelry, home furnishing, and auto industries.
The best discounting this year will take place in clothing stores. You will most likely see discounts at levels similar to those in 2009, but there will be no new apparel categories that will be discounted, says
Hendler says he expects to see declines in sales this year similar to those in 2009, which were as great as 20 percent. "Manufacturers have recognized that apparel, just like new cars, has become more a of luxury purchase than of a necessity," he says. "If consumers are purchasing clothing, it will primarily be replacement items."
"Deeper discounts are a function of being overstocked in a category, having either too much inventory at the wrong time or the incorrect inventory," Hendler says. As a result of the financial crisis in 2008, retailers have learned to manage their inventory more efficiently in order to cut back on costs. Offering less merchandise on the floor prevents retailers from having massive discounts at the end of season.
Cohen says retailers will start a "discount detox" process this year, trying to wean consumers off deep discounts by offering fewer of them. "This year will be more about the planned discount rather than the panic discount," Cohen says. The panic discounts of 2008 occurred because of excess inventory going into the holidays, while 2009 featured retailers selling to manage inventory. Cohen predicts retailers in 2010 will focus on planned discounting and promotions as well as nondiscounting on new and innovative products.
Women's clothing will be the most discounted sector of apparel, with sales focused on denim, knits, and blouses, says Hendler. Next comes men's clothing, which will have promotions on shirts and ties. Children's clothing will be the least discounted, as this is the most competitively priced clothing. Also, footwear won't see many discounts this year.
"The luxury area is without a doubt taking a significant beating," Hendler says. In 2009, luxury retailers had up to 30 percent declines in sales and profitability. These poor sales figures mean larger discounts for consumers this year, especially in moderately priced jewelry, such as silver and pearls.
In the jewelry business, there will be constant discounting throughout the year, not just near
Jewelry manages itself through economic cycles, Cohen says, meaning you will see less expensive jewelry become more important during challenging economic times. However, as the economy recovers, jewelry is going to be one of the first industries to really show the sign of recovery with pent-up demand and frugal fatigue setting in, Cohen says.
If you're looking for new furnishings, bedding, and bath products this year, you may benefit from continued discounting throughout the home furnishing industry. Fewer people buying new homes means that more home furnishing items will go on sale. Look for more sales on furnishings at big-box stores like
The common signs promising, "No interest! No payments for 18 months!" at furniture stores will soon be hard to find. Beginning on
This new act will drastically affect how furniture sellers do business. More than half of all furniture purchases are made because of these deferred-interest promotions, Beemer says. Once the act goes into effect, furniture suppliers may continue to offer zero-percent interest promotions but with a reduced down payment on a monthly basis, with possibly a lump sum due after a set time, Beemer says.
If you are looking to buy a car this year, expect to see more selective discounting on certain models but fewer industrywide discounts, says Schuster with
In the first months of this year, Schuster says there will be a large increase in car production. He says if there is not enough consumer demand right away, this could lead to selective and targeted discounting. If manufacturers see certain vehicle types that are not selling, there will be more specific discounting on those. Schuster says consumers can expect to see more targeted discounting like this but fewer blanketed discounts.
Of the major auto manufacturers,
Also, expect to see rising prices on used vehicles this year. In 2009, car manufacturers sold fewer fleet vehicles, cars typically sold to rental car agencies or commercial businesses. Therefore, fewer older fleet vehicles were sold to used car companies, in turn reducing the total number of used cars on the market and increasing their prices. This fleet management process will continue throughout 2010, Schuster says. As these used car prices rise, the new vehicle market will begin to look more attractive to car buyers.
Additionally, look out for lower monthly payments for new car leasing in 2010, Schuster says. "The benefit of leasing is you can buy more car with less of a monthly payment, as you are only paying for part of the vehicle," he says. The availability of new car leasing is increasing, as GM and
"In other words, the deals aren't going away, but you have to look harder to find them," Schuster says. "You may have to be more flexible; the incentives may not match exactly what you are looking for."
2010 Discounting Forecast: Retail and Auto | Rebecca Kern
(c) 2009 U.S. News & World Report