On December 12th, the Department of Commerce released news that the advanced estimates for November 2013's sales were up 4.7 percent compared to November 2012. Sectors that have seen the largest year over year increases included motor vehicles (up 10.2 percent), furniture (up 9.7 percent), and electronics (up 6.8 percent).
The unusual retail sales strategies Americans have seen this year is not apparent when one just glances at this data. This year, before Black Friday (the traditional kickoff of the holiday sales) began, something special happened. Stores opened on Thursday evening for special sales, creeping up the holiday shopping seasons so it landed directly on Thanksgiving itself.
For the past week I have seen retail stores selling diverse items from clothing to jewelry to electronics all starting their after-Christmas price cutting more than week before Christmas. These stores are slashing product prices by 25% to even 50% as they frantically try to sell merchandise before the holiday season ends.
This rush to dump inventory raises many flags. Some economists might cite these sales as an example of the strength of the free market in aggressively competing for customers. It is certainly true to say that stores are actively competing for customers but it forces us to ask a number of questions. Why are stores moving up their timelines earlier and earlier? Why are stores dropping their prices even before the end of the traditional holiday sales season? What message does this sales behavior say about the economy?
It is important to examine this sales behavior from the point of view of the business owner. Retail stores are slashing prices early out of fear that they will be left with devalued or even worthless inventory in January. This suggests that holiday retail sales up to this point haven't met the pre-order expectations for many of these stores and/or manufacturers. While some of this inventory will be written off as a loss by the retailer themselves, some of this inventory will be pushed back onto the manufacturer meaning both retailers and manufacturers may be concerned about shouldering a loss.
As some consumers jubilantly hop from store-to-store reaping the benefits of these price-slashing events, I suspect that there may be a hangover waiting. For the retailers and manufacturers, this aggressive, early sales strategy by businesses may be signaling a weak 2014 Q1 with retailers and manufacturers wondering how to dump the unsold inventory. For the customer, January may be a time to stare at their mortgage, credit card and health insurance bills and then glance over at those last-minute bargains.