This year, Black Friday wasn’t just a bigger deal for shoppers looking for pre-holiday bargains – it was also a pivotal time for retailers. Many companies are desperate to reduce inventory and hope to get a glimpse of what sentiment might look like over the next year. They worried that weak spending last weekend could signal another year of deepening rebates and sluggish growth.
The numbers are there, and they were good, for the most part. Adobe announced that online sales hit $9.1 billion on Black Friday, up 2.3% from a year ago, and $11.3 billion on Cyber Monday, up 5.8%. Gains paled from previous years, but retailers have come to expect slow and steady growth in e-commerce as the world moves beyond the pandemic.
Stores saw a lot more action. According to the National Retail Federation, the number of consumers who shopped in-store increased by 17% over last year. Traffic at Ulta Beauty increased 16.5% year-over-year and 31% from 2019, while TJ Maxx saw visits increase 2.8% from 2019, said Place Ai.
However, winter is coming. As much as Black Friday can serve as a barometer for the next few months, it can also be a misleading mirror.
Online sales may have broken records, but so have inventory levels. Inflation likely contributed to the increase in sales, said Neil Saunders, managing director of retail at GlobalData.
To boost sales, a number of brands have had to deepen and lengthen discounts. Online clothing discounts averaged 18%, up from 13% in 2021, according to Adobe Analytics. Some retailers started offering holiday discounts as early as October. By early November, 58% of styles were on sale, down from 35% last year and 51% in 2019, according to retail intelligence firm Edited.
Analysts fear that sales have been driven forward by early promotions. In its call for the press on Tuesday, the NRF expressed optimism about the month ahead: consumers told the trade organization in a survey that they had made just 0.5% of their planned purchases for vacations.
“There’s a difference between attitude and action… There’s definitely recognition and concern about prices and inflation, and yet people are still spending,” said Matt Shay, president and chief executive. of the NRF, during the roll call.
In 2021, there were not enough goods. This year, retailers have the opposite problem. Consumers have more choice and less to spend. They are therefore more demanding, said Susan Anderson, managing director of Canaccord Genuity.
“Retailers had to try a lot harder because consumers were really looking for these bargains,” GlobalData’s Saunders said.
As discounts eat into margins, brands and retailers still grapple with spiraling costs and ongoing headwinds, including a possible nationwide railroad strike, which Congress said Tuesday would act quickly. to avoid it.
Retailers’ focus remains on thinning inventory. Overpriced companies – including Nike, Gap, PVH, Urban Outfitters and Nordstrom – need to move goods, which could mean even more discounts in the coming months that carry over into next year. Cowen made an ominous prophecy: “Hard point downside could come in January.”
“A lot of people are over-inventory. They need to reduce that, convert to cash…they won’t take any more [inventory] until they sell,” Anderson said.
For consumers, buy now, pay later has played a role in the growth of online sales, according to Adobe. From November 1-27, there were 8% more orders rolling out buy-it-now, pay-later programs, with items per order up 12% (however, it’s hard to say in what extent this is attributable to factors such as organic growth of the platforms and generational preferences for debit cards). Purchases made through Afterpay, compared to the pre-holiday period, were up 120%, Square said.
While the service has helped boost sales for many retailers, it could also be a sign that consumers are starting to deplete the savings they’ve accumulated during the pandemic.
“It’s kind of scary…it shows the consumer is starting to get tense, they’re starting to use more credit,” Anderson said.
Today, consumer confidence fell to a four-month low, according to the Trust Council’s monthly index. Consumers may also be feeling the holiday hangover in January.
“We could be in for a bigger dip heading into December… There are a lot of question marks about the state of the consumer and their health,” Saunders said. “These will remain as we head into the end of the year.”