The Value of a Summer Deal

Marshal Cohen
Chief Industry Advisor, Retail
@marshalcohen

Once again, it’s time for some big summer retailer promotions in the U.S.: just in time for back-to-school shopping, a jump-start to the back-to-college season, and (of course) summer clearance. No matter what the reason might be, it is certainly the season for deals on all kinds of products, and it’s all designed to jump-start lagging summer spending.

Banking on a much-needed boost

Over the past year, retail sales revenue growth has come primarily from elevated spending on food and beverages. While higher prices on food-and-beverage CPG is causing a consumer pullback in nearly all discretionary general merchandise industries. In fact, overall general merchandise sales revenue is 5% lower for year-to-date through June.

Product demand has broken into positive territory during only one week, so far this year, and there have been less than a handful of weeks with positive sales-revenue performance. Retailers will be using the July promotional period to reduce excess inventory that has resulted from this sluggish performance.

Consumer response is conditional

Consumers are trading down to lower-priced items, to some degree, but the bigger story is that they are cutting back on unit sales, too. Demand is falling for both discretionary general-merchandise products and many areas of food-and-beverage CPG. Higher prices, higher interest rates — and now added expenses looming for those with student loans that will be required to be paid pack — have continued to contribute to the U.S. retail stall rate over the past several months. The power of promotions will come to the surface in the more economically challenged period that is approaching.

Time will tell if summer promotions can motivate consumers to purchase and spend more before the fall season kicks in, or if the reduced demand will remain steadfast, ultimately resulting in less revenue from lower pricing. To work well, the deals retailers offer need to be worthwhile and plentiful, both in the abundance of product offerings and in the size of the discounts. After all, only the consumer can determine the value of the deal.