Bargain Bin

There’ve been sales a plenty for the past month and a half and it looks like the future will only see more markdowns for the next month or so:

Retailers will most likely try to wean shoppers off such deep discounting in February and March, when they begin introducing their spring merchandise. But if their attempts to sell at full price fail, then consumers will once again feel they have the upper hand, and will wait to see prices fall.

What I think’s missing from this picture is that what will most likely curb the discounting would be dramatically reduced volume of orders. Since stores have already bought all these, say, sweaters from manufacturers they may as well offer them at steep discount. But if the only way to move merchandise is to slash margins to an unsustainable level, the way you deal with that come spring is by ordering way less stuff in order to spread the pain between the retail and manufacturing sectors. And realistically, it seems to me that we’ll have a long time to wait before consumer spending re-captures 2007 levels. Aside from the recession and the current drop in employment and incomes, previously the country was consuming substantially more than it was reducing. We now need to first pull out of the recession and then correct the global trade imbalances — only when that is done are we going to see consumer spending return to where it was before.

Advertisement

And with stores ordering fewer products and reducing their aspirations in terms of overall volume, they probably won’t want to keep nearly as many stores open. Lots of empty spaces at the local mall.