Black Friday: There will be 'fewer markdowns' amid supply chains issues, analyst explains

Natalie Kotlyar, BDO National Managing Partner, joins Yahoo Finance's Brian Sozzi to discuss Black Friday deals amid supply chain issues, the outlook for the holiday shopping season, and the future of brick-and-mortar stores post-pandemic.

Video Transcript

BRIAN SOZZI: All right, welcome back to Yahoo Finance's special presentation of "The Future of Retail." I'm Brian Sozzi still stationed in very cold New York City, seeing it get a little dark out here, the temperatures are dropping. You hear that cement truck moving.

Lots of tourists coming back here into the city. The crowds have been very strong, a lot different holiday shopping season this year compared to last year. But let's stay in all things holiday shopping and bring in BDO's National Practice Leader, Natalie Kotlyar. Good to see you.

NATALIE KOTLYAR: Good to see you, Brian. Thanks for having us.

BRIAN SOZZI: Of course. So what's your outlook for the holiday season?

NATALIE KOTLYAR: So I think to make a big story easy, simple, is this holiday season we're expecting to see fewer markdowns.

BRIAN SOZZI: Mm-hmm.

NATALIE KOTLYAR: Fewer markdowns in the store than we have seen in quite some time. As you know, most consumers are looking for that hot ticket item on Black Friday, on Cyber Monday, and I think we're going to see fewer of those, primarily driven by the supply chain issues that we're seeing for the last six to nine months.

BRIAN SOZZI: How intense is the inflation in retail right now?

NATALIE KOTLYAR: So inflation is definitely playing a role in pricing. I think that consumers are starting to get anxious about it. We did see an increase in October sales of 1.7%. But again, I think some of that was driven by inflation.

Consumers are not necessarily buying more items, they are paying more for those items. I think one thing really important to remember is that the consumer's wallet is not infinite. The consumer has a fixed budget, they're going to spend what they're going to spend. Some may spend over and they'll see that in their bills in January, but that's a whole other story.

BRIAN SOZZI: Yeah, I'm sure they will. Well some of these retail executives I've talked think we all have infinite wallets. So I can assure you that.

Are you surprised how consumers have overcome inflation? We've seen a lot of retailers, they reported earnings, sales up pretty good. Stocks, not so much, but still, consumers have come out here and shopped.

NATALIE KOTLYAR: I think it's the excitement of coming back into the store, coming back into some level of normalcy that we haven't seen in quite some time. We'll probably see that continuing into November and then in December. I do believe that once those bills come in, in January and February--

BRIAN SOZZI: They're the worst. Those are the worst.

NATALIE KOTLYAR: Exactly. And that's, I think that's what's going to happen in Q1. We'll definitely see a slowdown in purchasing in Q1. However, that's going to be-- that's going to be a double down for the retailers because all of the goods that are on the water right now, they're going to be coming in, in January, February, March.

And those could be older goods that will need to be marked down, so retailers are going to be having a double whammy. One, is you're going to have a smaller wallet, because all those credit card bills are coming in. And two, they're going to need to get rid of and liquidate that inventory.

BRIAN SOZZI: I've been hearing that too. The first part of next year could be interesting for retail. It sounds like it could be a sea of markdowns in retail.

NATALIE KOTLYAR: I do believe there's going to be a significant amount of markdowns, because think about it, you're having-- you're receiving goods that have been under water potentially for quite some time. So you may be getting sweaters in March. You may be getting outdated technology in March and that's going to require markdowns.

BRIAN SOZZI: When do you see the supply chain bottlenecks getting better?

NATALIE KOTLYAR: I don't see that happening at least for some time. I think that this will continue at least into the back-to-school season of 2022 and potentially into the holiday season. My advice to retailers is planned wisely, plan early and plan ahead. So you know what what's coming, what you'll be doing come November of 2022.

BRIAN SOZZI: If we zoom out, what is the state of retail post-pandemic? I mean, we're still in the pandemic in many respects, of course, but I mean, I look around the city here. There are so many stores still closed, it's kind of jarring.

Right across the street was a JCPenney. That's no longer there anymore. I mean, what's the state of retail?

NATALIE KOTLYAR: I think COVID has really turned retail in a different direction. It's definitely gone more digital to a digital way. Brick and mortar is going to be alive forever. And many years ago, or for the past several years, everyone has been saying, brick and mortar is going to die.

Brick and mortar is going to die. Brick and mortar is not going anywhere. It's going to morph and brick and mortar is going to partner with e-commerce. So whether that's through a very strong omnichannel concept, whether that's utilizing BOPIS, e-commerce and--

BRIAN SOZZI: That's buy online, pick up in-store.

NATALIE KOTLYAR: Correct. Sorry, buy online, pick up in store.

BRIAN SOZZI: No, it's what we call that here. I know we get used to all this retail stuff, I understand. Do you still see retailers opening up stores post-pandemic?

NATALIE KOTLYAR: Definitely. We're seeing a lot of retailers opening up stores. Those that have a good strong strategy, digital strategy, a strategy related to how to employ their employees properly and retain those employees, how to build strong brand loyalty is critical today. The worst thing that could happen to a retailer is if you buy something online or it has availability online, but you go to the store and it's not there. That is the most frustrating experience for a consumer and will certainly hurt the brand loyalty to the retailer.

BRIAN SOZZI: Before I let you go. You mentioned labor, and I know the supply chain bottlenecks, those will eventually end, but is labor one of the biggest problems in retail after the pandemic? We've seen a lot of retailers raise wages to $15 an hour, but they still can't get the workers they need.

NATALIE KOTLYAR: It's definitely going to be a significant issue going forward. I think in retail as well as in other different industries, the key is to understand and to offer what the young generation is looking for. Whether that's giving them a special technology to work with, whether it's bonuses, whether it's wages, that's going to be the most critical aspect is understanding how to bring those employees in.

BRIAN SOZZI: Before I let you go, any big holiday plans for you? It's good to be out, right?

NATALIE KOTLYAR: It is awesome to be out and I will be out this holiday weekend. I hope everybody's out there shopping. So shop big and early.

BRIAN SOZZI: Shop big. Well, thank you so much, Natalie Kotlyar of BDO. Good to see you.

Thanks for braving the frigid cold for us. We appreciate it. We'll talk to you soon.

NATALIE KOTLYAR: Great. Thank you so much, Brian.