As the holiday season unfolds, the American winter shopping culture appears to be experiencing a shift. On Black Friday, retail spending saw a modest 2.5% increase from the previous year, according to Mastercard SpendingPulse. While online sales fared better with a 7.5% rise to $9.8 billion, the overall weekend spending is projected to reach $37.2 billion, a 5% increase from last year, as per Adobe Analytics. Despite these figures, TD Cowen has revised its holiday growth estimate from 4%-5% to a more conservative 2%-3%.
This data doesn’t suggest an economic downturn, but it does underscore the challenges faced by retailers struggling to entice shoppers with what seems to be lackluster deals. Consumer intelligence is on the rise, urging businesses to adopt smarter strategies to stay competitive.
Retailers had already warned investors about a potentially softer holiday season. While inflation is showing signs of slowing down, consumers are still grappling with the impact of increased prices. Walmart Inc. Chief Financial Officer John David Rainey highlighted a «sharper falloff» in consumer spending towards the end of October. Similar caution resonated in the earnings reports of various retailers, from Lowe’s Inc. to Target Corp.
Though consumers continued to spend over the weekend, the response wasn’t as enthusiastic as companies had hoped. A significant reason for this lies in the perceived absence of irresistible deals. Retailers, including Gap Inc. and Target Corp., had planned for more balanced promotions compared to the previous year. In 2022, deep discounts were offered to swiftly clear excess inventory. This year, with fewer goods in stock, major price cuts weren’t deemed necessary. Instead, businesses focused on personalized promotions for rewards members and strategic discounts, aiming to stimulate purchases without compromising profit margins, explains Julie Van Ullen, Chief Revenue Officer of cash-back shopping platform Rakuten Rewards.
The shift towards more moderate markdowns has resulted in a rather subdued holiday deals season for shoppers. The landscape of excessive buying, synonymous with American culture, is evolving, and discount hunting remains integral to US consumption.
In today’s digital age, where consumers are equipped with price-tracking tools and social media platforms, it’s easier than ever to discern the value of a sale. Retailers must recognize the growing savviness of consumers, especially when it comes to spending cautiously.
Consumers swiftly took to social media to voice their dissatisfaction with the perceived lack of enticing discounts over the weekend. Deals like a 16% discount on an Xbox Series S Starter Bundle from Walmart Inc. were criticized for falling short of the traditional Black Friday fervor.
While the era of aggressive in-store events and doorbuster deals may be waning, the pandemic has accelerated online shopping habits, prompting retailers to invest in loyalty programs, apps, and fulfillment networks. This has created a safer Black Friday environment with increased price competition, benefiting both consumers and businesses.
As the new year approaches, businesses must rethink their strategies. The question for 2024 is, how can retailers excite shoppers throughout the holiday season? With events like Amazon Prime Day starting online in the fall and extending into December, retailers need lasting strategies that captivate consumers without compromising profitability. Whether it involves introducing new services like gift wrapping for online orders or bundling items for enhanced value, retailers must innovate to navigate the evolving retail landscape.
