US Shoppers Holding Out for Bigger Bargains on Black Friday!

US shoppers are being cautious with their spending during Black Friday sales, waiting for bigger discounts. This could result in a quiet holiday shopping season for retailers and potentially disappointing earnings in the coming months.

Consumers are not spending at the same pace as in the last couple of years, when the holidays were marked by post-pandemic stimulus. While estimates for the construction industry’s Black Friday sales won’t be available for a while, Salesforce Inc. expects U.S. online sales to grow 1% in November and December from a year earlier, which would be the slowest growth in at least five years. years. Sales were in line with that number on Thanksgiving Day and appeared to accelerate on Black Friday, the software company said.

Some shoppers said they weren’t impressed with Friday’s sales — and are likely waiting for retailers to offer better sales. At Willowbrook Mall in Wayne, New Jersey, Alyssa Fanelli said she came up empty-handed after shopping for wedding shoes at Macy’s. A brand she likes was offering 25% off. “It’s not a Black Friday deal,” Fanelli said, “just a regular sale price.”

That’s partly because retailers have recently done a better job of reducing excess items on hand. “Inventory is in line this year,” Jessica Ramírez, an analyst at Jane Hali & Associates, said in an interview. “There is not as much pressure to move inventory as there was last year.”

Other data companies are predicting an equally sluggish Christmas shopping season. Adobe Analytics expects online revenue to grow 4.8% year-over-year in the US over the next two months. Although faster than last year, it is well below the average annual growth of 13 percent before the pandemic. Mastercard, on the other hand, sees US retail sales in online and in-store sales up 3.7% this year compared to last year. It has returned to its pre-pandemic growth rate.

Consumers are “very price conscious now,” Vivek Pandya, principal analyst at Adobe Digital Insights, said in an interview. According to preliminary data from Adobe, Black Friday online sales were up 7.4% from last year, largely due to deep discounts on items such as toys, clothing and computers. These figures have not been adjusted for inflation.

Adobe, Salesforce, and Mastercard track different events, so the rate of growth will be different, even if the general direction of their forecasts is similar. Most of the data tracks online sales, reflecting the difficulty of tracking in-store sales in real time, as well as the continued growth of e-commerce and the shift away from the Black Friday sales of the past.

Still, many shoppers turned out Friday to celebrate the unofficial start of the holiday shopping season. The parking lot of San Diego’s high-end Westfield UTC mall was full by 11 a.m. local time. Stores such as Gap, Abercrombie & Fitch, Sephora and Lululemon were filled with customers buying items such as children’s pajamas, skincare gift sets and colorful leggings. In New York’s Hudson Yards mall, any store with an in-your-face sale sign drew a crowd. Uniqlo, Zara and H&M, with posters offering 30%, 40% and 50% off, were busy.

Consumer trade-ins

Personal savings are dwindling from the peak of the pandemic, and even though the rate of inflation is slowing down, many products are still more expensive than a couple of years ago. Higher interest rates also increase the prices of housing and car purchases. This forces consumers to make compromises.

Last year, Lyndsey and Tyler Manassa spent up to $1,000 on gifts for their family. This year they are saving for the baby they are expecting in January. “No Christmas presents this year,” said Tyler while shopping for new home essentials at Target in Chicago’s Logan Square neighborhood.

Still, part of the consumer retreat is a return to a more normal buying pace after the stormy shopping experience of recent years, says Michelle Meyer, US chief economist at the Mastercard Economics Institute. This year’s sales forecast points to “a return to a more balanced economy,” he said in an interview. Unemployment remains low, he added. “Consumers have the opportunity to spend.”

In the immediate aftermath of Covid-19, consumers feeling flush with extra savings and stimulus payments increased, allowing retailers to cut discounts. Then came the whiplash of supply chain chaos, which meant that products that didn’t arrive in time for the 2021 buying season piled forward at the end of 2022. Retailers offered steep discounts to clear these items, helping the juice. sales.

However, last year’s deep discounts seem to have led some shoppers to expect even better sales this year. Mark Talty visited the American Dream mega-model in New Jersey on Friday hoping to buy a jacket from the North Face. “I don’t see the big sale they’re talking about,” he said. He plans to spend about the same amount on Christmas gifts this year as in 2022.

“Not realistic”

Melissa Minkow, director of retail strategy at digital consultancy CI&T, said she’s seen similar complaints from shoppers on social media. “The expectation was that the discounts would be very, very deep,” he said in an interview. “It’s just not realistic.”

She said she saw big discounts, noting that Madewell was offering 50% off everything and Alo Yoga was offering 30% off. “People are so cost-conscious now that they really want to take a break wherever they can,” Minkow said. But retailers still need to protect their profits. According to Salesforce, the average discount rate is around 30% so far this Christmas, which is higher than in 2019 and well above the 24% rate in 2021.

Sales will probably improve – at least from the buyers’ point of view – in the coming days.

According to Adobe, shoppers looking to buy toys and clothing should wait until Sunday to get the biggest discounts. And for electronics and furniture, it’s best to wait until Monday. Retailers often lower their prices as the holiday shopping season progresses to boost sales or ensure they sell off excess stock on hand. This could hurt the profits of companies selling these types of products.

In contrast, companies expected to do well this holiday season include discount retailers such as TJ Maxx owner TJX Cos. and Ross Stores Inc., which have good prices and a wide selection, as well as companies that sell in-demand fitness and outdoor gear that capitalize on the wellness trend, Ramírez said. He said Nike Inc., Hoka owner Deckers Outdoor Corp., On Running parent On Holding AG, North Face Inc. and Lululemon Athletica Inc. are poised to benefit.