It’s a vicious circle that might have retail exchange traded funds (ETFs) squarely in the center: retailers are scaling back inventory because the shoppers aren’t there, but the shoppers can’t find what they need, so they stop coming.

Consumers are finding themselves holding out for better deals, but now the inventory just might not here there at all. This could lead to the slowest holiday season in six years, reports Lauren Coleman-Lochner for Bloomberg.

A number of retailers have cut fashion and seasonal merchandise by as much as 10% per square foot, and are refusing late shipments from manufacturers that they may have previously accepted in the past. This presents that threat of losing repeat customers if the stores either don’t have enough stock or can’t stock what was once on their shelves. They’re also bringing in goods closer to the time when they plan to sell them, heightening the risk that they’ll be out of stock.

This all combines to form a threat of “lost sales,” a bigger problem than selling an item at a hefty discount. Disappointing a customer runs the risk of losing them for good.

Retailers face a 2.2% increase in sales, which would be the worst performance since 2002.

The Retail HOLDRs (RTH) are down 21.6% year-to-date.

Tags: Retail, RTH