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Amazon.com Inc. crowed over this week\u2019s\u00a0Prime Day sales, boasting that the two-day discount promotion\u00a0\u201coutpaced” last year\u2019s event. Such a flashy description suggests the unofficial kickoff to the holiday season has set up the broader retail industry for a bright few months. But independent data from\u00a0credit card transaction\u00a0data provider Facteus paint a much more muted sales picture, with Amazon making slight gains and the broader retail industry falling behind.\u00a0<\/p>\n<\/p><\/div>\n
The\u00a0lackluster spending\u00a0is a troubling signal for the sector,\u00a0which was hoping for a rebound after a year of sluggish consumer spending. Instead, retailers are\u00a0facing\u00a0a disappointing end to the year with few choices other than to take on\u00a0risky\u00a0promotions to keep their heads above water \u2014\u00a0a strategy that will widen the gap between the haves and have-nots of the sector.<\/p>\n
The Prime Day event<\/a> that\u00a0concluded Wednesday, a sequel to Amazon\u2019s big sales promotion in July, is being closely scrutinized for signs of how the retail industry will fare during the holidays. Prime Day has morphed into a sector-wide bonanza, with retailers from Walmart Inc. to Macy\u2019s Inc. running competing events in both summer and fall.\u00a0While not as big as the post-Thanksgiving Black Friday weekend, it does give retailers\u00a0clues about consumers\u2019 mood. When sales in October\u00a0are humdrum, it isn\u2019t a good sign.<\/p>\n Amazon brought in an estimated $144.53 in average spending per customer\u00a0for the retailer, amounting to a 2% increase from last year\u2019s tally, according to Facteus. But for other retailers running competing discounts this week, sales fell by an estimated\u00a01% compared with last year, according to Salesforce.<\/p>\n Those are sales losses Amazon competitors can\u2019t afford. Retailers entered the fourth quarter under a lot of pressure.\u00a0A slowdown in consumer spending on\u00a0nice-to-have goods has dealt a blow to top-line growth. Best Buy Co. Inc., Dollar Tree Inc.\u00a0and Target Corp. all have narrowed their guidance for the rest of the year, saying inflation has put a crimp in consumers\u2019 shopping habits.<\/p>\n Gap Inc.\u2019s Old Navy brand said demand over the summer was noticeably weaker among its lower-income customers. Home-improvement rivals Lowe\u2019s Cos. Inc. and Home Depot Inc.\u00a0both saw sales declines and shoppers foregoing large DIY projects for smaller ones. Macy\u2019s\u00a0said its shoppers\u00a0have become more intentional about how they use their disposable income, leading to slower sales growth.\u00a0<\/p>\n Retail rivals Amazon<\/a> and Walmart are entering the season on stronger\u00a0footing. A behemoth like Amazon can better afford to offer discounts. It has an estimated\u00a0167 million Prime customers\u00a0in the US alone, people who typically pay $139 a year to join the company\u2019s leading subscription program and can be counted on to\u00a0shop with Amazon year after year. Walmart\u00a0has the advantage of being a renowned discounter and the country\u2019s largest\u00a0grocer by sales volume. The company has seen solid sales growth even as its brick-and-mortar peers struggle under weakened consumer spending. It also has invested in its e-commerce business, with the rollout of a competing subscription program called Walmart , and leads in online grocery\u00a0sales.<\/p>\n Smaller retailers have no choice but to continue offering deals to vie for shoppers who increasingly put price ahead of brand loyalty.\u00a0Three in five\u00a0consumers who plan to shop this winter\u00a0say they want to spend the least amount of money possible, according to market research firm Mintel. This type of environment sets up retailers for risky discount wars as they fight for customers.<\/p>\n For some companies, price wars come at a high cost. Discount retail chain Big Lots Inc. reported a slight dip in its gross margin rate last quarter due to increased discounts.\u00a0Dollar General Corp. expects\u00a0a $170 million hit to operating profit in the back half of the year due to\u00a0increased markdown activity.\u00a0Foot Locker Inc. told investors in August it expects gross margins for the year to decline in part due to steeper discounts. A discount war could be what drives a bigger wedge between smaller retailers betting on promotions and retail heavyweights.<\/p>\n At Amazon, Chief Executive Officer Andy Jassy has been relentless in cutting costs\u00a0across the business. In the last year, the company, which accounts for 40% of US e-commerce sales, has streamlined its distribution business around eight regional centers. That\u00a0helped\u00a0reverse its US e-commerce<\/a> operating income swing to a gain\u00a0in its most recent quarter and should allow the company to withstand bumps in the holiday period.<\/p>\n There is one bright spot for the rest of the industry: Retailers are entering\u00a0the holiday season with more balanced inventories, which means they likely won\u2019t be scrambling to offload surplus goods. That should help boost margins for retailers, who bring in about a third of their annual revenue during the holiday season.\u00a0<\/p>\n While a steady job market certainly soothes consumers\u2019 nerves, it might not be enough to offset the queasiness they feel about inflation. In all likelihood, retailers are facing a less-than-sparkling holiday season.<\/p>\n Leticia Miranda is a Bloomberg Opinion columnist covering consumer goods and the retail industry. She was previously a business reporter at NBC News and a retail reporter at BuzzFeed News.<\/i><\/p>\n \t<\/p>\n “Exciting news! Mint is now on WhatsApp Channels \ud83d\ude80<\/span> Subscribe today by clicking the link and stay updated with the latest financial insights!” Click here!<\/strong><\/a> <\/p>\n