Barbie dolls (right) are displayed for sale ahead of Black Friday at a Walmart supercenter on November 14, 2023 in Burbank, California.
Mario Tama | Getty Images News | Getty Images
Early Black Friday discounts were much higher in October compared to previous years, indicating that retailers are concerned that demand could be lukewarm during the crucial holiday shopping season.
Promotions across a range of categories, including clothing, appliances and computers, were significantly higher last month than in 2021 and 2022, according to data from Adobe Analytics. For example, the price of clothing online was 9% lower throughout October compared to the start of the month, but in 2021 and 2022 it was only 2% and 5% lower, respectively, according to the data.
Of the eight popular holiday categories that Adobe tracks, only electronics and toys saw fewer discounts last month than in previous years, according to its analysis.
Adobe’s data does not include promotions at physical points of sale, but covers more than a trillion visits to U.S. retail websites, 100 million SKUs and 18 product categories in the United States. total, which it says is more than any other technology company or research organization.
For years, so-called “holiday creep” saw Black Friday discounts begin earlier than the day after Thanksgiving, as businesses sought to extend the shopping season and meet changing customer demands. consumers who want more time to buy gifts. Although prices are already low, promotions are expected to peak from Black Friday to Cyber Monday, Adobe said.
While consumer spending fell in October, according to the new CNBC/National Retail Federation Retail Monitor, heavy discounts during the month boosted online spending, according to Adobe.
Online sales rose nearly 6% to $76.8 billion from last year and were fueled by deep discounts and an uptick in buy now, pay later usage. , which allows customers to split orders into four payments, according to Adobe. Last year, about 30% of overall holiday sales occurred online and in other stores, compared to physical outlets, according to the NRF.
Data from research firm GlobalData confirms Adobe’s findings.
The magnitude of discounts and the total amount of items on sale in October were also higher than in the past four years, according to an analysis of U.S. retailers from GlobalData.
In October, discounts averaged 24.1% on clothing, home goods, electronics, toys and games, sporting goods and beauty, compared to 16.7% off in 2019 and ’12. 9% reduction in 2021, GlobalData said. On average, 7.8% of all items were on sale at some point during the month, compared to just 4.9% in 2019 and 3.3% in 2021.
Overall, Adobe’s Digital Price Index shows that prices were lower in October compared to previous years. Last month, prices were down more than 6% compared to last year. In October 2022, prices decreased by only 0.7% compared to the previous year and in October 2021, prices increased by 1.9% compared to the previous year.
Bad weather ahead?
Early and deep discounts, which are expected to reach record levels this holiday season, are not necessarily a harbinger of tough economic times ahead. But the trend provides insight into the state of an increasingly cautious consumer and the steps retailers are taking to boost demand and stay competitive in the face of persistent inflation.
“It shows that they’re worried about the holiday season. They’re worried that it’s not going to be very strong,” said Professor Daniel Rubin, a consumer behavior expert at the Peter J. Tobin College of Medicine. St. John’s University. Business. “That’s kind of the impetus, right? That’s why they want to expand it. That’s why they feel they need to have deeper offerings across a wider variety of categories of products.”
The variations in discounts each year reflect the nuances brought by recent holiday periods, which are difficult to predict due to the chaos caused by the Covid pandemic.
In 2021, consumers were flush with cash from stimulus and supply chains were blocked, creating a classic case of high demand and low supply that led to higher prices and fewer promotions. The following year, when both stocks and inflation had increased and consumers began to feel the effects of high prices, promotions multiplied.
This year, retailers are still trying to understand the new calculation and may have “misinterpreted and overestimated” consumer demand for tangible goods, said Professor Brett House, who teaches economics at Columbia Business School.
“Higher discounts on goods may reflect an ever-stronger consumer interest in spending on services and experiences rather than tangible items, as people continue to make up for missed opportunities during pandemic-induced shutdowns,” House said of a trend that persisted for much of the period. year.
It could also “reflect companies’ desire to reduce inventories and advance products ahead of what is expected to be slower growth and weaker consumer spending in 2024 than we saw this year,” he said. -he adds.
Addicted to discounts
So far, the holiday outlook for retailers reporting profits over the past two weeks has been mixed. TJX told shareholders it expects a good holiday season. Gap was a little more cautious and said it expects sales to be flat or slightly negative.
Walmart Chief Financial Officer John David Rainey told CNBC that shoppers “lean heavily” on major promotions, and that October trends have the company rethinking consumer health.
Targetwhich was optimistic heading into the holidays this time last year, said this week that it’s too early to comment on the holiday season, even as splashy Black Friday ads litter its website and its stores.
During a call with investors, the company’s management team used the word “value” 17 times and the words “affordable,” “affordable” or “affordable” seven times.
While deep discounts fuel holiday spending, a trend that began picking up last year, consumers are getting used to promotions and some retailers may have trouble convincing them to pay full price.
“There’s going to be a very long-term problem here,” Rubin said, “where retailers are now almost conditioning consumers to never really pay full price, and so I think you might start to see even more discounting necessary to encourage people to want to create this sense of urgency.
He added: “I don’t know how you’ll come back from this. If you offer deals all the time, consumers get used to them. They don’t expect to pay full price and therefore won’t. pay full price and if you don’t give them that discount, your competitor probably will. »
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