Black Friday Was Dark Indeed for Retailers
Usually, after the biggest shopping day of the year, I scour the internet for a montage of shocking videos for an annual Black Friday Hall of Shame. This year, there weren’t enough badly behaved people to make an article.
Unfortunately, it’s not because of a new era of civility. It’s because nobody has the money to shop for Christmas, and if they do, they’re not battling it out in person.
This is important because it solidifies what we in the Preppersphere and alternative media have said for years: an economic collapse like we’ve never seen before is coming.
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Crowds were sparse at retailers on Friday.
According to Reuters, there was “no sense of urgency,” no lines waiting to get into the stores, and parking lots were uncharacteristically easy to navigate at shopping centers.
Those who did shop weren’t just randomly grabbing things off the shelf because they were cheap. They shopped strategically for things that they planned to purchase.
The outlook even before the day began was concerning. Retail Dive reported:
Heading into the holiday, some estimates showed that while in-store shopping could make a return, inflation (which was up 7.7% in October according to the Consumer Price Index) could thwart consumer spending, as shoppers expected to get less for more money.
Predictions showed higher-income shoppers tightening their budgets, and discretionary spending at some big retailers decreased throughout the year as consumers dealt with rising grocery bills.
Several retailers lowered their outlook for this quarter before the shopping event even started. Target tightened its Q4 outlook in November after earnings came in below expectations, and e-commerce native ThredUp did the same despite its focus being on secondhand goods — a category that could normally do well for consumers looking to save.
All of this laid the groundwork for a not-so-joyous holiday season for shoppers.
Alarmingly, a lot of people who did shop did so with “buy now, pay later” purchasing. With the dismal economic outlook, that may have been a critical mistake. Rod Sides, global leader at Deloitte Insights, warned:
“We now have much higher interest rates, and they’re gonna start to hit any credit card balances. With buy now, pay later, it tells you the consumer is challenged…in the long term, it’s a warning sign.”
Online purchases were up.
One sector that saw a merry and bright day on Friday was online shopping, setting a record with $9.12 billion spent. That’s an increase of 2.3% over previous years.
Whether this is enough to overcome poor performance in retail storefronts remains to be seen.
The outlook is worrisome.
The media has trumpeted the online numbers as a victory but downplayed diminished sales at brick-and-mortar outlets, saying that the outcome of Quarter Four remains to be seen. Retailers already have a glut of unsold merchandise due to inflation, and they could be left holding the bag with even more inventory if they over-purchased for this season.
It’s very clear that many shoppers are worried, and it’s affecting their holiday buying habits. The New York Times reported:
Even before the start of the season, some shoppers were already cutting back on discretionary purchases, leaving retailers with an unusually high level of inventory. They want to unload as much of that as possible before the start of the new year.
“The more sales merchandise that they move through now the better,” said Kristen Gall, president of the online platform Rakuten, which offers cash-back deals. “Because if you get caught holding a lot of inventory in January and February and consumers pull back because things feel significantly more recessionary, that’s where the worry comes in for retailers.”
Using deep discounts to increase sales can cause other problems for retailers.
There are risks for retailers, however, in relying more heavily on deals. The practice erodes profit margins that buoyed them during the pandemic, when many Americans spent plenty on all sorts of goods and retailers did not feel the need to entice them with too many deals. There are also worries that shoppers will become so accustomed to sales that they will only buy when promised a lower price.
This isn’t stopping retailers who are desperate to move inventory, though.
Adobe expects that discounts will hit record highs (upwards of 32%) this holiday season, as retailers contend with oversupply and a softening consumer spending environment. Computers, electronics and toys will hit all-time highs: Discounts for computers are expected to be as high as 32% (up from 10% in 2021), while electronics discounts are set to hit 27% (up from 8%), and toys at 22% (up from 19%). Other discount categories will include televisions at 19% (vs. 11% in 2021), apparel at 19% (vs. 13%), appliances at 18% (vs. 4%), sporting goods at 17% (vs. 6%) and furniture & bedding at 11% (vs. 2%).
The biggest discounts are expected to hit between Thanksgiving and Cyber Monday.
Even if retailers have big sales numbers, the real number that matters is profit. And so far, that’s looking questionable.
(If there is no money in the bank, how will you survive a winter power outage? Check out our free QUICKSTART Guide to learn more.)
Will Cyber-Monday be enough to save the weekend?
This has been the biggest shopping weekend of the year for decades.
The question that remains is whether Cyber Monday is going to be big enough to offset slow sales on Black Friday. Did people already spend their shopping dollars online on Friday? Adobe projects that today’s sales will top 11.9 billion dollars.
Business Wire’s analysis is moderately optimistic:
Adobe expects U.S. online holiday sales to hit $209.7 billion from Nov. 1 to Dec. 31, representing 2.5% growth year-over-year (YoY). During the 2021 holiday shopping season, $204.5 billion was spent online (growing 8.6% YoY), with consumers uncertain about returning to physical stores due to lingering pandemic concerns.
Consumers are expected to spend earlier this year, as a second Prime Day (Oct. 11-12) kicks off before the holiday season begins. The first Prime Day event drove record online sales for the retail industry overall, with $73.7 billion spent in July (up 20.9% YoY). These discounts will entice some consumers to start their shopping sooner, impacting Cyber Week performance. The holiday season will also be impacted by an uncertain economic environment, as shoppers contend with elevated prices offline (food, gas, housing) and the rising cost of borrowing.
Cyber Monday is expected to remain the season’s and year’s biggest shopping day, driving a record $11.2 billion in spending, increasing 5.1% YoY. By comparison, Black Friday online sales are projected to grow by just 1% YoY at $9 billion, while Thanksgiving sales are set to fall to $5.1 billion, down 1% YoY. These major shopping days are losing prominence as e-commerce becomes a more ubiquitous daily activity, and as consumers see discounts continuing throughout the full season.
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Did you shop on Black Friday?
I made one purchase on Friday for an item that I’d been planning to buy, which I held off on until it went on sale. On Thanksgiving, my family and I discussed it, and we set our expectations for a smaller holiday this year. We intend to focus any gift shopping on needed items and small mementos instead of big splurges.
Unofficial OP Poll: Did you do any holiday shopping on Black Friday? If so, did you go in person, or did you shop online? Are you reducing spending this year?
Article posted with permission from Daisy Luther