The Daily Dose: Oh No, Discount Fatigue!!!

 | Dec 24, 2013 | 10:00 AM EST  | Comments
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Stock quotes in this article:

jcp

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tgt

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anf

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coh

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wmt

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bby

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expr

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cost

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gnc

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twtr

For as long as we have been Earth inhabitants, these three sayings have been pounded into our heads:

  • Americans like to shop;
  • Americans love a great deal;
  • Never bet against the U.S. consumer.

Newsflash! It's time to challenge all of these lame wisdoms as holiday 2013 has brought this unwanted gift to usually exuberant retailers: discount fatigue. In a page ripped from the 2008 recession playbook, and not indicative of the +4.1% GDP figure just reported, consumers are yawning at otherwise eye-popping percentage off signs. They are not only laughing in the faces of well-dressed retail execs, but showcasing a major behavioral change. And yes, Mr. Market knows this is occurring and the impact it will have on profits. Most retail stocks are down in excess of 5% since Black Friday.

Here is what is happening out there.

Ten Not so Hidden Examples of Ugly Discount Fatigue

I'll bet you overlooked these things while walking the malls:

  1. An average clearance percentage off sign at J.C. Penney (JCP) is now 60%, with some offering 75% off, on apparel and sneakers;
  2. The $2.99 home goods table on a J.C. Penney second floor;
  3. Coach (COH) handbags at 25% the day after Black Friday, and since;
  4. Abnormally messy stores as consumers picked for what they penned on a detailed list, not splurges for little Joey and his five school friends;
  5. Excess seasonal inventories at Wal-Mart (WMT);
  6. Target (TGT) selling discounted TVs in the apparel section...in the final days before Christmas;
  7. Formerly top toys in Barbie, Hot Wheels, and Lego collecting dust at cheaper prices than a couple weeks earlier at Toys R' Us;
  8. Abercrombie (ANF) 50% off the entire store basically throughout December, yet inventory is rising;
  9. More special promotions clogging up Twitter (TWTR) feeds. Good for Twitter, bad sign for retailers and the eyeballs of all Twitters users;
  10. Creepy direct marketing from retailers, more frequently. Creepy in the context that discounts are being offered on items you bought sometime earlier in the year.

What Causes this Frownie Face Stuff?

  • There is a hidden underworld beneath +4.1% GDP: That hidden underworld is named "Reality."  Those not heavily affected by higher stock prices: (1) lack the cash to buy as much goods as retailers want and planned for, hence they are forced to ramp up promotions -- and the consumer still is unable to respond; (2) those that do have a little more monthly budget flexibility continue to analyze the true value of buying that extra non-essential gift, wondering: "will my child learn anything from this toy and still be using it in April of 2014?"
  • Hip to the game: The secrets of retailing have been exposed thanks to mobile. Even at 50%, consumers realize that prices were marked up beforehand, so they should wait to see that red sign on a pair of Levis that reads 70% off.

Who Is Catching the Attention of People?

  1. Best Buy (BBY): They now have clearance walls that trap you as soon as you enter their stores. In order to make it to the back of the store, you must browse these new walls.
  2. Express (EXPR): Meh holiday season so far, but it continues to mail its coupons to your house.
  3. Costco (COST): Mails its latest coupon book to your house.
  4. GNC (GNC): The ultimate email inbox bombers, but at least they hit you with unbeatable promotions. Lose: Vitamin Shoppe.

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