Retail discounting to increase this holiday season: Study

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Discounting and promotions will be more prevalent among retailers this holiday season, according to a new study from accounting and consulting firm BDO Seidman LLP.

The BDO Seidman Retail Compass Survey examines the opinions of 100 chief marketing officers at leading US retailers regarding their expectations for the 2007 holiday shopping season. The survey was conducted in October.

The study found that 73% of CMOs believe discounting and promotions will be more prevalent this year compared to last year due to the current credit crunch. These same credit concerns have led 64% of the CMOs to be more cautious in their sales and inventory purchase plans.

In terms of revenues, 54% predicted that same store sales will be flat this holiday season. Of the 41% who predicted an increase, the increase was up to 16%. As a result, the overall average sales prediction for the holiday season is an increase of 5.03%.

"When you consider that discounting was widespread during the 2006 holiday shopping season, the forecast of even more discounting this season communicates both a growing anxiety among retailers about reaching sales goals and the potential for value buying for consumers," said Al Ferrara, a partner in the Retail and Consumer Product Practice at BDO Seidman, in a statement.

Credit concerns have overtaken energy costs as the most crucial issue impacting holiday shopping sales this year. When asked to pick one external issue that will have the greatest impact on the holiday shopping season, 27% of CMOs cited credit concerns, 22% focused on high energy costs, 17% mentioned the weak housing market, 15% cited product safety issues and 14% brought up the stock market. In 2006, 52% of CMOs viewed high energy costs as the number one issue.

Safety issues surrounding Chinese products has affected planned inventory assortment according to 26% of CMOs and led them to focus more of their marketing efforts on US made products. However, only 15% of the CMOs say they have made changes to their supply chain due to the product recalls linked to Chinese suppliers.

There will be a bigger focus on green products this holiday season compared to last year, according to 37% of CMOs.

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