Cyber Monday retailers change game on holiday shopping discounts

Retailers are still offering plenty of holiday deals this year, they've just changed their discounting strategies as more holiday spending moves online. 

Instead of luring consumers with eye-popping discounts on Black Friday weekend or Cyber Monday, chains are reducing their prices over a longer period of time as economic conditions have improved since last year.  Indeed, the Conference Board's closely watched index of consumer confidence recently hit a 17-year high as the stock market rallies, the housing market remains strong and the unemployment rate is at a low not seen in more than a decade.

"That means they can be more strategic," said Howard Davidowitz, head of the retail consulting and investment banking firm Davidowitz & Associates. "Consumers will still see plenty of deals. There's a difference between offering plenty of deals, however, and taking 25 percent off the whole store."

Some retailers are getting creative.  Walmart (WMT), for its part, is planning to throw 20,000 holiday "parties" at its stores, add more toy demonstrations and bring in Santa Claus to take selfies with shoppers. Rival Target (TGT) has added new store brands and more customer service staff. Best Buy (BBY), whose recent earnings disappointed Wall Street, is offering free shipping on all online orders during the holiday season and is expanding its same-day delivery service.

Chains are also increasingly focussing on exclusive brands, which should help big-box operators such as Walmart and Target, according to Cowen retail analyst Oliver Chen. He estimates that the level of holiday discounts is about the same overall, although struggling mall-based chains are especially under pressure to attract customers to their stores.

"This year, we believe the mall is already on sale, and the discounts will likely be deep and broad across categories and retailers," he writes. "However, we do believe certain brands are somewhat insulated given high levels of brand equity & craftsmanship, such as Lululemon and Canada Goose. We think prospects for better-than-feared results in department stores are likely, given a favorable cold-snap in weather. "

E-commerce giant Amazon.com (AMZN) among others is benefitting from the increase in online holiday shopping. According to Chen, the Seattle-based company has hundreds of thousands of items for sale. Discounts on selected apparel are averaging 30 percent, for instance. Amazon also is slashing prices on its Echo smart speakers and other electronics and is advertising deals on the 23andMe DNA testing kits.

Adobe Analytics estimates Thanksgiving online spending at $1.52 billion as of 5 p.m. Thursday, up 16.8 percent on a year-over-year basis. Between November 1 and November 22, web-based sales hit $30.9 million, up 17.9 percent from 2016.

According to IHS Markit economist Chris Christopher, online spending will account for more than 18 percent of all retail sales, up from 16.7 percent last year. Web-based spending is expected to increase 13 percent on a year-over-year basis. Prices for some consumer goods, such as televisions, have been on the decline, enabling people to get more bang for their buck.

"Many traditional brick-and-mortar stores are fighting for market share, and so are offering amped-up price promotions, which many American households, in turn, have come to expect," he wrote. "The spread of smartphone-based `shopping apps' which can send live updates on bargains and promotions as well as scour the internet for deals, has equipped some shoppers to find the lowest prices in real time -- amplifying the winner-take-all retail environment, especially over the holiday season."

Unfortunately, the improved holiday outlook isn't enough to reverse the industry's serious long-term problems including the glut of retail space. "We are going to continue to be a train wreck," Davidowitz said of the retail industry. "We are in the second inning of that."