- In October, early Black Friday deals were significantly more substantial than in previous years, indicating retailers’ worries about the holiday demand.
- The extent and number of items on sale in October surpassed those of the past four years.
- Some retailers are relying on discounts to stimulate demand among cautious consumers.
Displayed for early Black Friday sales at a Walmart Supercenter in Burbank, California on November 14, 2023, are Barbie dolls (R).Thank you for reading this post, don't forget to subscribe!
This photo was taken by Mario Tama | Getty Images News | getty images.
In comparison to the previous years, the discounts offered this October for Black Friday were notably higher, signaling retailers’ apprehension regarding potential lower demand during the crucial holiday shopping period.
Data from Adobe Analytics reveals that promotions for several categories, such as apparel, appliances, and computers, were significantly more extensive last month compared to 2021 and 2022. For instance, the online prices for apparel were 9% lower in October, whereas in 2021 and 2022, they were only 2% and 5% lower, respectively.
Among the eight popular holiday categories, only electronics and toys had lower discounts compared to the previous year, according to Adobe.
Although Adobe’s data does not include promotions at physical retail locations, it encompasses over a trillion visits to U.S. retail websites, 100 million SKUs, and 18 product categories, making it more comprehensive than any other technology company or research organization.
Over the years, the onset of Black Friday discounts the day after Thanksgiving, known as “holiday creep,” has occurred to extend the shopping season, addressing the evolving consumer demands. Adobe anticipates that although prices are already low, promotions are expected to peak from Black Friday through Cyber Monday.
According to the new CNBC/National Retail Federation Retail Monitor, consumer spending decreased in October, while extensive discounts encouraged online spending, as per Adobe.
Online sales surged by nearly 6% to $76.8 billion over the past year, driven by substantial discounts and increased usage of buy now, pay later, allowing customers to split orders into four payments. NRF reported that approximately 30% of total holiday sales last year were through online and non-store channels.
GlobalData’s findings align with those of Adobe. The depth of discounts and the number of items on sale in October exceeded those of the preceding four years based on the analysis of U.S. retailers by GlobalData.
During October, the average discounts for apparel, home goods, electronics, toys & games, sporting goods, and beauty were 24.1%, compared with 16.7% in 2019 and 12.9% in 2021. On average, 7.8% of all items were on sale during the month, compared to only 4.9% in 2019 and 3.3% in 2021.
Adobe’s digital price index demonstrates that prices in October were lower than in previous years, with last month’s prices over 6% lower than the previous year. In October 2022, prices were only .7% lower than the previous year, and in October 2021, prices were 1.9% higher than the previous year.
The early and substantial discounts, projected to hit record levels this holiday season, do not necessarily indicate upcoming economic challenges. However, they offer insights into the state of the increasingly cautious consumer and retailers’ actions to stimulate demand and remain competitive amidst persistent inflation.
Professor Daniel Rubin, a consumer behavior expert at Peter J. Tobin College at St. John’s University, stated, “It shows a concern that they have about the holiday season. They’re worried that it won’t be strong enough. It’s kind of an incentive, right? That’s why they want to pursue it. That’s why they feel they need to offer deeper deals on a greater variety of product categories.”
The variation in discounts each year reflects the intricacies of the recent holiday seasons, made unpredictable by the disruptions caused by the COVID pandemic.
In 2021, stimulus funds were depleted, supply chains were strained, leading to high demand, low supply, higher prices, and lower promotions. The subsequent year saw increased inventories and inflation, prompting a rise in promotions.
Brett House, an economics professor at Columbia Business School, suggested that this year, retailers are still adjusting to the new dynamics, potentially “misreading and overestimating” consumer demand for tangible goods.
He proposed that the trend of higher discounts on goods may stem from consumers’ continued preference for spending on services and experiences instead of tangible goods, as they seek to make up for missed opportunities during pandemic-induced shutdowns.
“It may also reflect a desire by businesses to reduce inventory and move product ahead of what is expected to be slower growth and weaker consumer spending in 2024 than this year,” he added.
The holiday outlook from retailers reporting earnings in recent weeks has been mixed. TJX anticipates a robust holiday season, while Gap is more cautious, expecting sales to remain stagnant or slightly decrease.
John David Rainey, Walmart’s financial chief, noted that shoppers heavily favored major promotions and the trends in October forced the company to reassess the strength of the consumer base.
Although Black Friday ads filled Target’s website and stores, the company expressed it was too early to gauge the performance of the holiday season.
During an investor call, Target’s executive team emphasized the importance of “value” and “affordability” multiples times, implying their focus on cost-conscious consumers.
If substantial discounts continue to drive holiday spending, a trend that emerged last year, consumers may become accustomed to promotions, posing challenges for some retailers to persuade them to pay full price.
Rubin remarked, “There’s really going to be a long-term problem here, where retailers are now setting up consumers to never really pay full price, and so I think that’s what you need to get people excited. May start to see even deeper discounts. Create a sense of urgency.”
He added, “I don’t know how you get around that. If you’re offering deals all the time, consumers get used to it. They don’t expect to pay full price, and as a result, they will not do so. Pay full price and if you’re not going to give them that discount, your competitor probably will.”
The information is sourced from www.cnbc.com