We are just hours away from the start of the long-awaited final weekend before Christmas and the kids aren’t the only ones feeling a little anxious.
In the wake of disappointing Thanksgiving and Black Friday sales, brick-and-mortar retailers are understandably on edge.
Cowen and Co. analyst Oliver Chen said his latest mall tour “confirmed his concerns” that elevated outerwear inventories are “likely to cause problems” for retailers in the near future.
“Our holiday mall tour at [Garden State Plaza] mall in New Jersey showed seasonal inventories (i.e. coats, boots, sweaters) are high,” Chen wrote on Dec. 17. “Warm weather combined with weak traffic is likely causing more markdowns and subsequently deeper than planned gross margin pressure.”
In late November, Black Friday sales and traffic numbers indicated declines in brick-and-mortar retail and a shift to online shopping. Consumer research and analytics firm Shoppertrak estimated brick-and-mortar retail declined 10.4 percent compared to 2014.
Of the companies in his coverage area, Chen indicated he saw particularly elevated inventories at Macy’s Inc., The Gap Inc., Abercrombie & Fitch Co. and Nordstrom Inc.
While department stores appeared particularly promotional and “the most bloated,” Chen said Victoria Secret and Pink were “the clear traffic winners with a heavy mix of gift-able items, newness in key categories, and lounge/athleisure product.”
During her mid-December shoes-store checks, Citi Research analyst Kate McShane estimated that about 65 percent of footwear was discounted, up from 18 percent from last year, while markdown rates appeared flat year-over-year at 26 percent off.
“We also noted a significant year-over-year increase in active and outerwear promotions across the board for this time of year, though overall markdown percentage levels remained relatively healthy,” McShane wrote. “Retail traffic trends continued to deteriorate to down 9 percent year-over-year in November versus down 5 percent in October.”
So what will brick-and-mortar retailers need to do boost momentum this weekend and stay in the game?
The short answer, experts say, is to “evolve.”
And, it’s something many retailers are already doing.
“There is no denying that e-commerce expansion is disrupting retail and impacting the supply chain across channels; the internet is here to stay and various industries including shipping companies, big box retailers, malls, and others are evolving to meet the changing ways consumers want to shop,” McShane wrote. “For the companies that are traditionally considered brick and mortar retailers, IT and supply chain investment has been critical to maintaining or gaining market share through continually improving omnichannel content and capabilities as well as providing flexible fulfillment methods.”