Black Friday: Retailers are ecstatic after buyers spent a lot of money on gifts and decorations in the days after their Thanksgiving feast.
- IMPORTANT NOTES
- This year’s Black Friday weekend was boosted by more online shopping, huge bargains, and milder temperatures in many parts of the United States.
- But that doesn’t mean the rest of the season will live up to expectations.
- According to Adobe and the National Retail Federation, roughly half of holiday shoppers’ buying is complete as of the end of Cyber Monday.
However, a strong performance does not guarantee that those companies will have a spectacular Christmas quarter. According to Adobe Analytics, online spending increased by roughly 8% year on year to $38 billion during the five-day period from Thanksgiving Day to Cyber Monday. According to a National Retail Federation poll, a record high of 200.4 million shoppers visited merchants’ stores and online during the same time period. And shares of Ulta Beauty and Foot Locker soared this week after the companies reported better-than-expected profitability and a good start to holiday shopping for sneakers, beauty, and other items.
However, several unique elements, such as increased use of online shopping, higher pricing levels, and lower weather in various parts of the United States, may have propelled those early purchases. This has sparked concerns about whether customers’ willingness to spend will remain strong throughout the crucial shopping season — or whether it will fade into a more marked slowdown between Black Friday and the final push before Christmas.
Ulta is in one of the strongest retail sectors, as beauty defies poor discretionary spending patterns. Nonetheless, on the company’s earnings call this week, Ulta CEO Dave Kimbell was eager to stress out that retail’s busiest weeks are ahead. Ulta and its beauty competitors, he says, would have higher promotional levels than a year ago because they appeal to budget-conscious clientele.
In comparison to previous years, the NRF has also moderated expectations. The industry’s leading trade body forecasts a 3% to 4% increase in holiday-related expenditure from November 1 to December 31. That is basically in line with the average annual growth rate prior to the pandemic years’ surge. On a conference call this week, NRF CEO Matt Shay said the season is on track to exceed that projection, even though shoppers outperformed the trade group’s forecasts over the five-day Thanksgiving weekend.
Here are three major things that contributed to the Black Friday weekend:
Instead of rushing to the mall after Thanksgiving dinner or waiting up outside stores for Black Friday early doorbuster deals, more Americans are filling their shopping carts from the comfort of their own homes. Even after the pandemic years, online shopping still accounts for a small portion of total Christmas expenditure, leaving lots of possibility for expansion. According to Adobe Analytics, one in every five retail dollars is spent online. According to the NRF, only around 30% of all holiday sales last year were made online, through apps, or in other non-physical store locations.
According to Adobe Analytics, consumers spent $109.3 billion online from November 1 to Cyber Monday this year. This represents a 7.3% increase over the same period previous year. It’s an even bigger spike from pre-pandemic levels in 2019. From November 1 to Cyber Monday of that year, consumers spent $81.5 billion online. This year’s period had a few extra days because Thanksgiving was later in 2019 than in 2023, but it demonstrates the greater popularity of e-commerce.
Adobe’s data includes over a trillion visits to retail websites in the United States, 100 million distinct items, and 18 total product categories. One possible explanation for the change? Some prominent retailers that used to be popular on Thanksgiving evening are now closed. One of the pandemic’s legacies is the closing of Walmart, Target, Best Buy, and other retailers on Thanksgiving.
Furthermore, in a year when Americans are more frugal, online shopping may be the better option, according to Vivek Pandya, a principal analyst at Adobe Digital Insights. He claims that comparing costs is easier by opening multiple online browsers and apps rather than driving from store to store.
“The focus is on price and value and the consumer has been very strategic,” he pointed out. It’s too early to tell whether this season’s greater online shopping total means holiday shoppers will spend more overall year over year — or if more of their purchases are simply shifting to websites and apps. According to Pandya, Adobe does not track in-store purchases.
According to Adobe, total Christmas season online spending will reach $221.8 billion from November 1 to December 31, representing a nearly 5% increase year over year. If the estimate is true, customers still have a little more than half of their online holiday spending left. According to the NRF’s report, approximately half of all holiday shopping is still done online and in stores.
A desire for bargains
The yearning for bargains is a recurring theme throughout the season. After more than a year of paying higher costs for practically everything, including milk, petrol, and housing, American consumers have demonstrated that a compelling price reduction is one of the most effective motivators. Black Friday and Cyber Monday have become linked with deep discounts, which may account for the high shopper turnout and online spending.
According to Adobe, on Cyber Monday, buyers saw discounts peak at 31% for electronics, 27% for toys, 23% for clothes, and 21% for furniture. The price reduction in electronics, clothing, and furniture were higher than on Cyber Monday last year. Toys, on the other hand, had smaller discounts than the previous Cyber Monday.
According to Scott Wren, senior global market strategist at Wells Fargo, it is a mistake for investors to conclude that increased Black Friday weekend spending suggests the American consumer is in good condition. Instead, he called it the “last hurrah” before the recession, which Wells Fargo believes will occur in the first half of 2024. greater credit card debt, greater borrowing costs, and the likelihood that the US Federal Reserve will continue to raise interest rates to combat inflation could all contribute to a slump, according to him.
“People are just about tapped out, but the holiday season, people are willing to even further extend themselves,” that’s what he said. Consumers may also face reality when it comes to paying off their holiday goods. Along with swiping credit and debit cards, Americans are funding purchases in novel ways. According to Adobe, the use of buy now, pay later reached an all-time high on Cyber Monday. It generated $940 million in online spending, representing a nearly 43% increase year over year. Shoppers who used the payment option also purchased more things, with the number of items purchased increasing 11% year over year. Taking on credit card debt this holiday season will also cost more if consumers carry a balance month to month.
A timely cold snap
Due to an unusually warm fall, buyers in many parts of the country were able to postpone purchases of sweaters, hats, jackets, and other cold-weather clothing. However, the Black Friday weekend brought colder temperatures to major areas like New York City – the kind of cold snap that retailers crave.
Companies such as Levi Strauss and Macy’s have spoken out about the difficulty of milder weather in the last two months. On an earnings call in mid-November, Macy’s CEO-elect Tony Spring told investors that “the weather was a little warmer than we would have liked,” but stores adapted with items that could transition from season to season. According to Levi CEO Chip Bergh, unexpectedly warm weather affected denim sales at retailers such as Walmart, J.C. Penney, and Macy’s.
“It’s hard to sell blue jeans when it’s 110 degrees outside,” he told in October.
According to Scott Bernhardt, president of Planalytics, a predictive demand and analytics company that measures the impact of weather on retail spending, colder weather over Black Friday weekend prepared the basis for higher sales. According to him, a cold snap often drives spending since it gets buyers in the holiday spirit and makes their shopping list better match the seasonal products that retailers have exhibited in stores. Retailers may not be as fortunate in the coming weeks, according to Bernhardt.
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