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Report has red flags for retailers heading into holidays

Will promotions and markdown cut into retailers’ holiday cheer?

Retailers are holding more inventory heading into the 2018 holiday season versus last year, and markdowns and promotions are also tracking higher compared to last year, according to the "DynamicAction Retail Index: 2018 Analysis and Holiday Outlook". It reported a 21% increase in held inventory, and a 2% increase in online orders so far this year, with a resulting 3% rise in margin impact.

In addition, orders using a markdown are up 5% year to date over this time last year, resulting in a 27% margin impact. In what DynamicAction called a “red flag for retailers,” markdowns rose 18% in August alone. In another “red flag,” there has been no weekly increase year-over-year in new customer orders since April.

The report noted that retailers have been vying for digital wallet share with an increased (5%) marketing spend year-to-date over last year.

“However, the misalignment between what customers want and what’s being made available, coupled with an increase in markdowns, could have detrimental consequences on customer retention and profit,” the report stated. “Gaining a true understanding of customer profitability has never been more important leading into the busiest shipping season of the year for retailers and brands.”

In other findings, new customer orders are down 5% year-over year so far in 2018. Free shipping is up 13% year-over-year, with the value of returns up 36%.

DynamicAction offered a tip for retailers as they head into the holiday season.

“Pulling inventory levels into alignment with demand ahead of the holidays will be paramount to driving profitability through the lens of ‘views availability’ — ensuring specific products that customers are seeking do not fall into fragmented or out-of-stock levels prior to the holiday season,” the report said.
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