On paper, the picture of 2013's holiday retail sales seems healthy enough. Gains over last year are about 2.3 percent when measured in sales. But beind those relatively rosy numbers are a few caveats that make the picture more muddled. Aggressive discounting and cutthroat sale pricing meant that even a boost in sales meant lower profits. It also turns out that the strength of this year's sales was in the weeks between Black Friday and December 12th, then the last two weeks of the holiday season were lackluster in sales volume as well as profitability.
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Excerpt: "Things were stacked against retailers this holiday season, and it seems they may have pushed too hard to please. Consumer demand was anemic, and there were fewer days to shop because of the late November date for Thanksgiving. Foot traffic in stores dropped off in December. Retailers responded with aggressive discounting, then tried to force through more last-minute shipping deals than UPS (UPS) could handle. The result? Unhappy customers and concern about ever-narrowing profit margins.
Sales of holiday items increased 2.3 percent compared with last year, according to Mastercard (MA) data cited by the Wall Street Journal. But retailers got there by lowering prices, continuing a reliance on discounts that has had many industry observers nervous since the financial crisis. This takes the luster off what gains were made, says Gian Fulgoni, chairman of comScore (SCOR). 'I think we’ll look back at this online holiday season as one where absolute dollar sales gains in consumer spending were held back by heavy retailer price discounting that occurred in an attempt to stimulate consumer demand,”' he says in a statement.
Then there were the shipping problems. UPS has been planning for the last-minute crush for a year, but admitted that it couldn’t keep pace with a wave of orders. FedEx (FDX) had trouble, too, and customers from retailers such as Amazon.com (AMZN), Kohl’s (KSS), and Walmart (WMT) were left empty-handed Wednesday. Amazon passed out gift cards and offered refunds to customers whose last-minute purchases didn’t arrive in time for Christmas. It blamed the fiasco on UPS. But it also looks like retailers may have left UPS in the lurch as they tried to entice shoppers by pushing the limit on how late they could order items."