Discounts for winter sales bigger than last year

With a recession looming, US retailers want to get rid of their stock. The discounts during the winter sales will therefore be bigger than last year. This is evident from research by credit insurer Allianz Trade. According to Johan Geeroms, our Director Risk Underwriting Benelux, we can also expect a similar effect in Europe.

“Retailers are faced with a dilemma. Should they keep prices up and run the risk of disappointing sales? This would force them into the New Year with a large stock and a poor liquidity position. Or should they opt for substantial discounts? This would allow them to can get rid of their stock but also reduce the margin and profits”.

Huge discounts on TVs and computers

Allianz Trade has calculated that American consumers can make the most of sales by purchasing computers and televisions. And to a lesser extent by purchasing toys, household appliances, and sports equipment. The lowest discounts are for clothing and furniture.

The inventories of US retailers are now USD 50 billion higher than last year. This is partly due to stagnant sales. Since the start of the pandemic, inventory management has been a major challenge for retailers. On one hand, they had to deal with strong demand. On the other hand, they had to deal with production disruptions in China, bottlenecks in US ports, a shortage of truck drivers, and increasing transport costs.

Mass lay-offs

According to Johan Geeroms, spending by European and Dutch consumers is still not too bad. “In the first three quarters, expenditure was not far below last year’s level. We do see malaise for online shops. That’s because during the corona years, we bought a lot more stuff online than usual. That has now largely been reversed. We have already seen mass lay-offs at the major online shops such as Zalando and Amazon”.

The blow is coming

“Brick and mortar stores saw their turnover plummet in the corona years. Last year it increased again. But it is certain that there will be a backlash. High inflation and energy prices are definitely going to take their toll. Any extra money will go to energy bills instead of shops. In addition of that, problems with staff shortages and the disrupted supply of goods. Next year, we will see stores closing and quite a few retailers going bankrupt”.