Is This the Year Discount Mania Finally Ends?

[Music] Hello and welcome to the debrief from the business of fashion, where each week we delve into our most popular viola professional stories, with the correspondents who created them. I'm executive editor Brian Baskin, and I'm senior correspondent Shina Butler Young. And this is the debrief's holiday retail spectacular. Today we're going to talk about what fashion and beauty brands are planning for Black Friday and whether it'll be enough to lift consumer spirits. And we'll also talk about how this is the most wonderful time of the year for luxury department stores, while most of them. Joining us to help decode this season's shopping trends are BOF reporter's Kat Chen and Malik Morris. Kat Malik, welcome to the debrief. Hey guys, thanks for having us. Thanks for having us, Glad to be back. Glad to have you both back, our retail experts. First questions to you, Kat. Set the scene for us a bit. The American consumer isn't a really weird place right now, right? Yes, things are a bit funky right now. I'm sure everybody has seen the headlines about consumer sentiment. Every week there's a new report out about how crappy people are feeling about the state of the economy. Today there was a new report out from the conference board that consumer sentiment has slipped, I think, another six points from the month prior. People are not really feeling rosy about the state of the economy, but the irony is that they're still spending money. So the question is whether this holiday season is going to be successful for retailers because it's a very, very important quarter for the entire industry. So explain that dynamic though because one would think if consumer sentiment how they're feeling is at its worst level, I think it's worst level ever, close to it by submeasures, you would think that would translate into lower spending, but we've been seeing the opposite. Typically, spending and sentiment correlate with each other, but since COVID, there's been some discrepancy and we've been reading and studying on this and you know, there was this great planet money podcast that you circulated with the newsroom and the theory is that even though sentiment is down right now, spending has been driven by the wealthier segment of the economy. So these are consumers that have been insulated by a very strong stock market and real estate that's appreciated immensely in the past five years. So they have been comfortable to spend insulated from inflation and the effects of tariffs. And so they're continuing to spend even though the bottom half or rather the bottom 80% of the economy are really feeling the effects of slower wage growth and of course, in certain categories of clothing prices have just skyrocketed since COVID. So Malik, how do retailers read something like this for Black Friday? Certainly everyone can't cater to the 1% with their holiday deals. They've got to do something to get that bottom half of the consumer group spending again. So Black Friday's Cyber Monday is not a fix for a mediocre year. This year is really like any other time where you really have to fight to get consumers attention and slapping you know, 50% off everything discount on a photo and putting that on Instagram is not going to cut it this year. You really have to say, well, this is why you just stop scrolling and shop with us. I'm talking about the approach that brands are taking to this murky, you know, economic environment where the bottom half of consumers are incredibly cautious about where they're spending. I mean, they are still spending but like they're very very discerning is to say, here's what out brand matters. It's kind of similar to what I often say is like it really just comes down to like good brand building and obviously this is going to be winners and losers but the one that can make people shop even during Black Friday when there are discounts are those that can make people understand why they should be buying their products at the beginning. What are some brands that are doing a good job of that right now? We're recording this on Tuesday, November 25th and Abercrombie and Fitz just reported their results and they were really really good and they even raised their guidance for the rest of the year and that's the kind of brand I would think would get clobbered in environment like this where people would just say, I'm not going to spend $50 on jeans at Abercrombie. I'm going to go to TJ Maxx and spend $25 and instead the opposite is happening. Are there other brands that are sort of defying the odds and doing really well in this tough environment? So then I've seen and been talking to brands about is this idea of like still introducing newness during this time, like I was the brands that I spoke to and I said they because these deals are happening earlier and earlier so some brands are starting their Black Friday deals and the beginning of like November or something even doing it right after Halloween or around Halloween and so they have some early data to go off of and I've seen a few that have introduced new products specifically for this time, tied to really cool brand marketing campaigns as well and that seems to be working because again, it's about creating a sense of urgency to buy something right now and if like here's this new product that we've introduced rather than like this thing that's been sitting on the shelf that's been collecting dust now is the time to buy it. It's like no, here's something that's really fresh that feels really fun and also I've seen a lot of brands that say that they're doing well right now with Black Friday, you know, ahead of the actual weekend is that they're prioritizing hero best selling products. Like here's a good time to get the thing that you've been comforting for a very long for a while right now where there's a deal rather than like here's let's just try to offload a bunch of inventory that we over purchased you know earlier in the year. Where does the price cutting fit into the equation right now because retail is claimed to not be doing that they're going to offload things full price and offer something special but it doesn't look like that in my inbox or my or my text messages. So what consumers want is value. They want to see the best price for the best value and they don't necessarily want to see a cheap product either they don't necessarily want to pay a low price for a good product. They want to get a good deal but they don't want to buy a cheap product if that makes sense and so I feel like the days of like we're going to we're going to do all these mark downs and then like it's going to be like a week of 80% off. I feel like maybe that mentality is changing. I feel like going into 2026 there's going to be more sophistication around price architecture of truly surgically pricing each product so that at retail before mark downs retailers are going to get the best margin for each product that matches consumer expectations well at the same time protecting their profit margin and so I think that there's even on the consumer side the sale mentality is maybe waning a little bit because like personally I don't want to wait like for the sale and I don't want to every black Friday have to like look for the deals and do that like I want to buy the product when I need the product and I think that it's exhausting for the for the retailers as well and also the technology is out out there like this is what AI is able to achieve. I just I was just gonna bring that up. Yeah go on. Right like this this is what AI is meant to do is price products like perfectly and so sales and like this huge bananza of black Friday well which by the way even even before AI I think this was in the conversation and so like I don't think this conversation about value is necessarily about promotions anymore which by the way you know Brian you talk about Abokronbee but Abokronbee is doing really well but so is TJ Maxx a company that doesn't do sales around black Friday you know and and and Quince you know a company that Malik has done amazing reporting on and oh so doesn't do sales on black Friday so it's you know it's all very counter intuitive. I'm curious to hear your thoughts Malik on this thing we say and retailers say that you know they've been saying it for a while that the consumer is looking for value in that that definition is evolving then I go to the mall on Friday and I see people wrapped around the block and looking for the biggest sales sign they can find what's your take on recon sign on those two things well yeah I think we're in the age of curation and so even when people expect in deal they don't want to feel like they're just getting slop and I be on to tickets early a point like we also are coming off of all the tariff you know media and that means margis of pressure so like brands actually can't play a race on the bottom game with discount. this year and I'm pretty sure there are those that are going to be doing rock bottom. Pricing or like an incredibly steep discount, but a lot of them aren't. It was having materials so they had to reconfigure their supply chains. So they've been able to inventory manage and plan better going into Q3 and Q4. I had to go and back to my earlier point of like being able to introduce new products because they've been so surgical and how they're laying out the foundation for this selling this year. So they're not really just looking to get underperforming skews out the door. And yeah, so I feel like that couple with the fact that consumers want things to feel curated even if they are looking for a deal. It means that it's not going to just be like a free for all. So let me just throw products at you. It's 90% off. You know, they even do things like introducing gift with purchase. I'm not sure how prevalent gift with purchase were before this year, but that seems to feel relatively new and also early offering early access for Black Friday. So everybody deals to their top customers. So trying to make it feel exclusive at a time when everyone is offering discounts because you can go anywhere in the world through e-commerce or anywhere, you know, physically in your town to like find a deal during this time. So it's all about like what is going to get me to come to you. So yeah, I think it's a conformist of things to make consumers feel special during this time. It's a make things feel to feel edited. Whether it's the discounting cadence itself or the privacy being offered on top. We'll be back with more of the debrief right after this. We've been mostly talking about mid-priced, you know, mall brands for lack of a better word. Luxury is in a completely different headspace when it comes to discounting. Most of them don't do it. And they certainly are participating in Doorbuster Black Friday deals. Cat, you just wrote though about what luxury department stores and other multi-brand retailers are doing for the holidays. Want to tell us a little bit about how they're approaching these questions that we've been raising? Well, sure. So the luxury departments for space going into the holidays this year is an interesting time for them, not necessarily because of the economy, but because of the circumstances in this space right now because of the particular players in this space, namely SACs, Global, Essence and Luis Aviaroma and the challenges that these players have faced this past year, SACs with various restructuring after its acquisition of Neiman Marcus and Bergdorf and vendor challenges that, you know, goes back to 2023. Essence, bankruptcy, Luis Aviaroma, filing for court protection in Italy. They have opened up White Space for their competitors on healthier financial footing to come in and basically eat their lunch and acquire their customers, acquire their sales. And that will be very, I think, intense in this holiday season. And so their competitors are ramping up tactics to acquire a bigger slice of their competitors pie. And so it's ramping up clientelling. I think that's the biggest tactic. I mean, they are all of these luxury retailers already were prioritizing clientelling. So according to these VICs, very important customers, very, very wealthy top shoppers, the luxury brands were already doing this, right? So as aspirational shoppers were pulling back, they were courting the rich people who were still spending money on expensive things. But now it's a matter of, okay, well, SACs, Neiman Marcus facing some turmoil, stealing their top shoppers, stealing their stylists, their sales associates and then with them comes their rolodex of top clients, right? And then throwing these lavish events in order to court those customers. And then also talent, hiring executives, not coaching because there were maybe poaching, but there were shakeups at the top level. And then hiring those talent. So if we think of consumers, you know, a lot of economists are calling the K-shaped recovery to the pandemic where the wealthy are just zooming higher, spending more and more and everyone else spending less and less or their spending power just isn't keeping up. It sounds like the department stores are really going after that top leg. And we're talking like the real top of the top here. I've certainly never been contacted by one of these clientelling sales associates just by my lavish spending at these stores. Is that right? Yes, it's not us. So I mean, like this is like the top 20% of consumers buying the economy. We're talking about like the top 0.1%, maybe even less than that, right? And by the way, I haven't had a chance actually to mention the beneficiaries of their competitor struggling, but so some of them are blooming dails, my Theresa forward, which is owned by the Ravov group. And I didn't get the chance to talk to shop up or Nordstrom, but they were mentioned by my sources as well. Well, okay, but I mean Nordstrom, I mean, they, I'm sure they have clientelling, but they have tons and tons of regular folk customers. I mean, what are these stores? They can't exclusively rely on the same 20 billionaires to support them all. I mean, they must be doing something for the masses, right? Or at least the upper middle class of the masses. I saw Malik nodding his head. Did you have some thoughts there? No, I mean, I was just going to say that you know, Nordstrom specifically is, is they're very curated specifically when it comes to footwear. So like just selection is so good. And also they're really good partners to like their brands, you know, so like they get really good image or another good thing that they do. I mean, and kind of kind of speaks more to this is like online. They're like on just like drop shipping. So like brands can like play with, you know, what can sell and see if it does well and then kind of de-listed if it doesn't do it. It's just like a lot of flexibility. And I think that that just offers the end consumer a better experience. If brands feel comfortable with them as a partner and feel good in that, like this room to experiment as well, I'm sure Cat has more thoughts, better thoughts on that. No, that's, you bring up such a good point. I think every retailer is doing more drop shipping right now, but on the point of brands on vendor relationships. So that has been a very critical weakness of SAX. And when I was doing reporting on the story about how other retailers are stepping in, you would think that vendor relationships would be an easy area where competitors are like, okay, easy. I'm going to come in and be better partners. And many are, you know, I often hear that Bloomingdale is just a great partner, but way smaller in footprint to be able to replace the volume of a giant like SAX, right? But at the same time, it's like there hasn't really been a big change really in the standard of how retailers treat brands. If anything, the refrain that I've heard is that overall, the way that SAX has just been irresponsible with payments has given license for other retailers to pay their partners late. And that hasn't changed. And the reason that this matters, I mean, obviously matters to the brands and their finances, but the reason this matters for retail generally is if a department story is nice to brands, they're probably going to get better products from them, first dibs on the great, you know, hero product of the holidays. And then if I'm a customer, I walk in and even if I don't have my Nordstrom approved personal shopper, I'm still going to go, hey, wait a minute, this is like pretty good stuff. I'm going to shop here. That's the goal, right? Yes, exactly. And not just the hero product, maybe more importantly, the new product. Because when a brand gets paid faster by their retail partners, they can pay their vendors, their factories faster, right? So then they get the stuff faster and then they deliver the stuff to their retailers faster. And then us, the customers, we can, you know, we will see the new stuff. And we're like, oh, new cashmere sweaters and then new dresses and then we will be inclined to go to those stores more often, right? And so like the entire ecosystem is more robust. If only the retail partners were just nicer to their brand partners. And so right now that relationship between retailers and brands, like that relationship isn't great. And it's not just sacks, right? Like sacks has been the poster child of bad partner. But what I've heard is that it's not just sacks. A lot of partners are not great. Some partners are amazing. But there's a lot of things, very little things that all retail, many retailers can step up and do whether that's just being better at promoting their, you know, brands, whether that's sending, sending emails to their customers when a new brand partner is being onboarded. And there's a funny anecdote that's the kicker of my story, which is that founder of a brand, the CEO, she was like, it would be nice if my brand partners would just post about us on their Instagram pages. There's another wild card also that was going to affect the brands and the retailers this Black Friday and Cyber Monday and that is AI. I know we talked about earlier using it for sharper pricing but there's also going to be a chance that customers use it for their shopping experience. Malik, you were on the debrief recently talking about these shopping apps. Have they gotten any better? Will you see shoppers on Black Friday Cyber Monday opening an AI app first to find the deals or to find brands? That's good because I don't know if like the AI power shopping apps are in the place yet but this is a concern for them but I do think that where we're seeing AI disruption here is that like shoppers actually using my chat GPT to create Christmas lists and then consulting like we had to find good deals on the bags or blush or overcoat so what have you and actually recently chat themes so it's last time chat GPT launched direct checkout to capitalize on that behavior so you know the partner with Shopify which Pa was like store front's for literally every brand under the sun and then also the partner with Walmart and with Target but it's what's happening is I think it's still too new for some brands to put like a dedicated strategy behind making sure they pop up and chat GPT search results but also Ella Lems are surfacing results based on like existing chatter so for brands already in the site guys and it's like they're receiving good reviews and a part of discussions on red and other forums you know they'll show up in a consumer's results when that person is looking for you know a great cozy sweater for this stepfather I mean that's me I'm throwing my Christmas list in there and not the not the X's wedding event dress now we're gonna start getting us to you found your event stress and now you're looking for the best sweater for my stepfather but no but part of making sure you discover a bowl and people will buy your products especially at this just critical time is you know whether a super retail partner directly with you is doing having over it done the qualitative brand billing stuff brand building stuff that predates you know the rise of Ella Lems but in terms of like you know dedicated air power shopping platforms I mean they're still trying to change consumer behavior I don't think they're there yet so like say hey we're gonna get you 30% off 40% off all these luxury brands price brands just yet but I'll keep an eye on all that yeah my prediction and actually I think that'll be a good way to close the episode as if we all offer a few predictions but mine is that this is the year everyone uses AI to recommend products but next year will be the year everyone uses it to buy them because if you trust it to shop to recommend you know products and find the best deals for you why wouldn't you trust it to just complete the sale at that point does a great prediction I will say that I think that this is the year that maybe this company of finally comes to an end like I think the way the brands are are are tempering the discounting cadence and maybe retraining customers in that vein will have hopefully long tail effects for future holiday season like every event in some brand we have discounted it all and we stayed at the BF book back Friday so that we can create the sense of urgency and the sense of feeling special that is happening right now so then that could be a long tail effect of this year I don't have I don't know this prediction but I just think that um we can't discount part in the pun the discount uh seeking shopper that's out there I think that inflation the geopolitical climate the economic climate is really weighing on people and I think there are going to be a large large cohorts of discount seeking shoppers in the next couple of weeks and I think they're they're going to be some very disappointed kids at Christmas if there aren't deals that are 80% at least something so that's not a prediction but I do think that some of this strategy does not account for people that are really cash dropped I think we I think there needs to be a mechanism for that as someone once said kids don't need 30 dolls they only need two dolls who was that the philosopher oh I don't know you know what I'm gonna go and that's in a similar direction China I'm gonna offer a theory to and not a prediction going back to what we were talking about on consumer sentiment but I have a theory that the reason why consumer sentiment surveys are trending downward and has been since COVID is because of the hypervisibility of our lives and everybody just spending all this time on social media and just being exposed to headlines all the time without necessarily understanding anything about the world I think that has a lot to do with like why people feel so crappy about the economy there's just so much news about the economy tariffs interest rates and I think because of that people feel bad about the economy without necessarily understanding it or knowing what to expect I knew this was all our fault somehow thank you but you know what I want to know is if you guys are shopping this black Friday and what you're buying I've never been a black Friday shopper oh okay okay that's not true I haven't shopped black Friday in a very long time because I just I shopped too much to begin with I'm a shopper hall like so like when someone gets a black Friday like go over having money left but I will I honestly as I'm becoming an actual adult this is the time I'm gonna be looking at like Christmas presents to get people that this is a good opportunity for that and I haven't done that before but yeah I'm not usually a tune to the black Friday up at all I tend not to because I don't like feeling that pressure like if I don't find something right now I'm missing some huge deal especially because as we've been discussing for the last half hour that's really not true anymore the one time I do it is if it's a really big ticket item that I know I need like furniture or something that is the time when you're like okay these deals don't come around all the time and I would make significant savings so let's let's take the plunge. Less green tea the anybody and I am following the lead of retailers and saying that I will never do something and then I do it so every black Friday I say I'm not going out I just don't want to be a part of the ruckus and then I end up probably half the time going out and just kind of seeing what's happening I get very curious and I also have that that fashion disease called FOMO I feel like I'm missing something if I'm not seeing it but I'm not a big shopper but I do like to be a part of it. I'm like the consumer this year I want to I need an iPhone I want to get a deal on an iPhone this year so. Well sending you positive vibes hopefully yeah hopefully we all have a great black Friday and cyber Monday I think that's a positive we started this off as saying this is going to be our holiday spectacular we ended on a shopping positive note cat Malik thank you so much for joining us thank you for having us this was so fun please be sure to check out Malik and cat's coverage of the holiday shopping season at businessofashion.com these and other stories are available to B.O.F. professional subscribers only and you can find the links in the episode notes you've been listening to the debrief produce and edited by Olivia Davies and Eric Brea I'm Sheena Butler Young and I'm Brian Baskin we'll be back next week with a new episode thanks so much for joining us and be sure to follow us wherever you get your podcasts.