It is days before Halloween, but the Christmas sales have already started.
Part of it is that shoppers are squeezed for time, more so in December than in any other month, so the heart of the Christmas shopping season has moved to November. Retailers have to target Christmas shoppers in November, or they will miss many of them. Then, this year, retailers have become nervous about consumer price resistance. With record high prices for cotton and other cost increases, prices for some items of clothing have jumped 20 percent from a year ago, and consumers are responding not by buying less, but by not buying at all.
Retailers committed to their Christmas stock levels in July and August when it seemed that consumer sentiment was rising, and even though they were cautious in their buys, they are now getting nervous. If consumers will not buy $110 blue jeans, perhaps they will not buy anything else either. Whatever stock retailers are stuck with at the end of November will not be easy to clear out in December or January, so price reductions are starting quietly this week. Retailers are pulling back at this point on the prices that may have been too high to begin with, with the idea that the real sales will hit in the second half of November.
When retailers are anxious to sell their possibly excess stock before consumers buy in some other store, that is a setup for a price war. Price wars aren’t hitting yet, but some retailers are making price guarantees, making up the price differences if customers find a lower price for a purchase before Christmas. Lower prices are almost guaranteed, so retailers are betting most costumers won’t be organized enough to claim the refunds they’ll be due under the price guarantees.
The one area where a price war cannot occur this year is computers. The looming hard disk drive shortage, because of flooding in Thailand, will have manufacturers and retailers holding the line on computer prices, and offering bundle discounts on printers, software, and game controllers instead.