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Discounts for U.S. Retail in 2018
For retailers, 2018 is going to be another year for big discounts as consumers see their wallets shrink from rising healthcare costs that are eating into their discretionary income.
“2018 will be on par with 2017 for promotions,” said Marshal Cohen, chief industry analyst for the Port Washington, N.Y.–based The NPD Group. “It’s the go-to method to stimulate business.”
Cohen, as well as Matt Powell, senior industry adviser for sports at The NPD Group, was updating the market-research company’s earlier retail forecast for the year.
Declining purchasing power, Cohen said, was being caused by healthcare premiums and deductibles that have increased at a faster pace than earnings for most working people. “After the first of the month, you spend one-third of your discretionary spending power,” Cohen said. Consumers are spending less of their discretionary income on fashion, more money on trips, wellness and food. It’s up to retailers to figure out how to encourage consumers to put a higher priority on clothing.
“Consumers are building memories rather than wardrobes,” Cohen said. He recommended building on those experiences. “Will I have the right products to make that memory that much greater? Think of every time you take pictures wearing the same wardrobe. You’re going to think, ‘I can’t take selfies wearing the same outfit all the time.’”
Retailers are finding pressure from automatic-replenishment models by companies such as Amazon.com. Cohen said that the company is seeking to be the retailer that replaces basic clothes including underwear, T-shirts and basic jackets on a consistent basis. It’s up to fashion brands to keep finding novel things, which will intrigue shoppers, and also look to give them the goods that they want.
Direct-to-consumer business and private-label business will continue to grow, Powell said. He noted that private labels accounted for 19 percent of the fashion business in 2017. Vertical retailers such as Lululemon Athletica were counted as basically doing private label.
Private-label business offers an opportunity for retailers to fill in merchandise gaps not occupied by their branded partners. It also gives consumers a chance to shop for something that may not be offered by brands.
Powell said that underperforming brands will be pushed aside by the growth of private labels. However, “I don’t see a day when retailers carry only private label,” he said.
