Retailers selling non-essential goods such as apparel and beauty products have had a difficult quarter, with Target and Macy’s reporting declines in digital and brick-and-mortar sales. Consumers are reducing spending on apparel and accessories and health and beauty, with more than a third now buying from retailers with cheaper prices. Macy’s has revised its annual sales and profit expectations downward, implementing clearance markdowns and modifying inventory levels to manage surplus inventory and make up for revenue shortfalls. The decline in non-essential purchases is affecting not only brick-and-mortar retail but also buy-now, pay-later companies and the home/lifestyle category.
As per the analysis by recent reports, retailers and merchants specializing in non-essential goods like apparel and beauty products are experiencing a difficult quarter. This is primarily due to a consumer slowdown in discretionary purchases, resulting in declining sales and revenue issues.
Target, a leading retailer, reported a 3.4% decline in comparable digital sales, while Macy’s experienced an 8% fall in digital sales and a 6% decline in brick-and-mortar sales. As a result, Macy’s has revised its annual sales and profit expectations downward, citing a slowdown in demand brought on by inflation.
Data from PYMNTS’ May Consumer Inflation Sentiment report reveals that consumers are reducing their spending on apparel and accessories and health and beauty products. In response, retailers are implementing additional clearance markdowns in Q2 to manage surplus inventory, as well as planned category composition and inventory-level modifications to make up for any revenue shortfalls.
However, there is a limit to how many markdowns a shop can make without having an impact on revenue, as the negative prognosis predicts. More than a third of customers now purchase products from these product categories from a retailer with cheaper prices, demonstrating that pricing, rather than brand cachet, is their focus.
The consequences of this ongoing decline in non-essential purchases go beyond the traditional brick-and-mortar retail industry. In May, the buy-now, pay-later company Affirm reported its most recent quarterly results, revealing an 8% year-over-year fall in consumer electronic purchases. Additionally, the home/lifestyle category fell by 10% over the same time frame, reversing its 2% rise from the prior quarter.
With that being said, retailers and merchants specializing in non-essential goods like apparel and beauty products are experiencing a difficult quarter due to a consumer slowdown in discretionary purchases. To manage surplus inventory and make up for any revenue shortfalls, retailers are implementing additional clearance markdowns and planned category composition and inventory-level modifications. However, retailers must be cautious not to make too many markdowns, as this could negatively impact revenue.
