Dearth of discounts: Retailers pull back on holiday sales amid clogged supply chains

Open this photo in gallery:

For lingerie and loungewear retailer Boutique La Vie en Rose Inc., Halloween used to be a line in the sand. Advertising for holiday gift-giving did not begin until the spooky season was through.

That changed this year. As news about supply-chain snarls led many Canadians to start shopping earlier than usual, the Montreal-based retailer moved up its marketing. But it’s not just the calendar that is shifting: La Vie en Rose is also adjusting the discounts it plans to offer during preholiday sales.

“We’re usually a very promotional brand. … This year, we’re going to be selling a lot more at regular price,” said Mirna Saffouri, vice-president of marketing and digital strategy. “We will still have something interesting to offer our customers, but we took a different approach to make sure we’re not lacking any particular styles or categories.”

Canadian retailers take to the skies to mitigate holiday supply chain woes

Supply-chain fears in Canada, U.S. ramp up ahead of shopping season

And La Vie en Rose is not alone. Shoppers can still expect to see the usual Black Friday and Cyber Monday sales – which have been creeping earlier in the season for years now, unmoored from the original event pegged to American Thanksgiving, which this year is Nov. 25 – but some retailers have been signalling the sales will not be the same this year.

“We’re going to be less promotional than 2020 and 2019,” Under Armour Inc. chief executive officer Patrik Frisk said on a conference call with analysts last week.

With supply-chain issues making news in recent months, the company has said consumers have “perceived scarcity around product in general” going into the holidays, Mr. Frisk added. “I think that’s going to enable us to continue to drive a more premium position for our brand,” he said.

Consumers expect deals during the preholiday period, and retailers “would be probably foolhardy” not to offer discounts, Andrew Rees, CEO of footwear company Crocs Inc., said on a call in late October. “But I think depth and breadth will be less for sure,” Mr. Rees said. “And we’re not planning to return to a higher promotional cadence any time soon. We see demand for the brand far ahead of our ability to supply at this stage.”

Some people are not waiting for the sales. Concerns about product availability are prompting Canadians to shop earlier. In a recent survey of more than 1,000 people, Deloitte Canada found 35 per cent planned to start their holiday shopping before November. Shoppers are likely already noticing flyers and storefronts advertising preholiday sales. But the need to manage inventory is driving some retailers to alter their promotional strategies.

“There’s perception versus reality,” said Marty Weintraub, partner and national retail practice leader for Deloitte Canada. “How many things go on sale, and how deeply they go on sale? ... It’s that breadth and depth – you can look a lot more promotional than you really are as a retailer, if you’re smart about it.”

It’s not just a question of being tactical: With shipping fees rising significantly, retailers’ costs have gone up. At Splash Toy Shop in Richmond, B.C., owner Beth McKercher is still planning a Black Friday sale, but she will be applying those discounts on higher base prices. Some of her suppliers have raised their prices by 20 per cent to 30 per cent in recent months, while others are taking away incentives such as free freight, which can account for 10 per cent to 15 per cent of the cost. She’s had to raise prices to compensate, although for some items she has absorbed some of the cost, taking a cut on her profit to ease the blow for customers.

“We’re definitely having discussions around, can we afford to put everything in the store on sale and break even or lose money on certain products?” Ms. McKercher said. “We’re currently discussing how we’re going to manage this.”

Those that are offering sales are spreading them out even more than usual. UPS saw good shipment volumes in October as retailers have been “pulling forward promotions,” CEO Carol Tomé said on a conference call late that month. And Amazon.com Inc. stepped up the promotions it ran in October, repeating its 2020 strategy to meet surging demand for online orders by encouraging customers to shop early.

Department-store chain La Maison Simons had already begun scaling back on Black Friday in recent years, but supply-chain issues have accelerated that thinking, CEO Peter Simons said.

“Right now, supply chains are still tumultuous and hard to predict. To promote something on Black Friday that we would simply not be able to offer to customers the following week because we’re out of stock, that makes no sense,” he said. Higher transportation costs have also put pressure on the number of items retailers can promote during the holidays, he added. “Everyone is trying to be smart about what they do.”

IKEA Canada had also pulled back on traditional Black Friday sales starting last year, in favour of a campaign encouraging people to sell back their old furniture, as well as to shop for used goods in the stores’ “As Is” section. But outside of Black Friday, supply constraints have led the company to limit some other continuing promotions.

Supply-chain dynamics can differ depending on product category. Sephora Canada senior vice-president and general manager Gregory Bruyer said he does not expect product availability to be as much of an issue in the cosmetics industry, although the company has seen some delays. Sephora ordered products three to five months earlier than usual just to ensure its holiday stock came in on time. And the retailer is planning additional promotions in December.

La Vie en Rose also placed holiday orders early and is in a relatively good inventory position, Ms. Saffouri said. It has already put some pyjama sets on sale and is planning more promotions for Black Friday. But the retailer will be keeping a close eye on volumes and on the level of discounting that makes sense.

“If we find things are selling out quickly, we will adjust,” she said.

With a report from Matt Lundy

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.