Washingtonexaminer

A muted Black Friday expected as holiday deal season starts earlier

I.Mitchell3 months ago

While shoppers will pour into retail stores across the country this Black Friday, the uptick in spending may be more muted than in past years.

Black Friday has traditionally ushered in the start of the frenzied holiday shopping season. Retailers advertise enticing one-day blockbuster deals in order to lure hordes of shoppers to their businesses with the hope that they will buy other items while visiting. That dynamic has changed, though.

Ted Rossman, senior industry analyst at Bankrate, told the that he expects there will be a “very frugal” consumer this Black Friday and holiday shopping season. He said that the holiday shopping seasons in 2020 and 2021 were “blockbusters,” but that shouldn’t be expected this time around.

“If inflation is high, and your grocery bill is up, and your rent is up, and everything else is up — that has people in a frugal mood this holiday season,” he said. “So I don’t think it will be a disaster for retailers — we’ll probably eke out a slight gain over last year — but it’s not going to be a blockbuster season either.”

The National Retail Federation expects holiday spending will increase by between 3% and 4% from last year, with shoppers set to spend up to $966.6 billion in November and December.

The expected growth is right in line with pre-pandemic growth trends, according to the researchers. In the decade before the pandemic, annual holiday spending grew by 3.6% on average.

Still, this year’s shopping season will be a slowdown from 2022, which notched big 5.4% growth. It is also lower than the pandemic rebound years — holiday sales rose more than 9% in 2020 and a whopping 13.5% in 2021.

“Consumers remain in the driver’s seat, and are resilient despite headwinds of inflation, higher gas prices, stringent credit conditions, and elevated interest rates,” said NRF chief economist Jack Kleinhenz. “We expect spending to continue through the end of the year on a range of items and experiences, but at a slower pace. Solid job and wage growth will be contributing factors this holiday season, and consumers will be looking for deals and discounts to stretch their dollars.”

Rossman also pointed out the changing nature of Black Friday. Retailers, clamoring to rake in as much profit as possible off of the holiday season, have begun offering deals akin to Black Friday much earlier. That cuts into some of the demand for day-of Black Friday shopping as some consumers have already had their fill by the time Thanksgiving has turned the corner.

“Black Friday to me has become more of a movement, more of a season of deals as opposed to a singular day or weekend on the calendar,” Rossman said. “A lot of the Black Friday kind of pricing started in early October this year.”

Prime Big Deal Days took place online in October and was billed as an early start to the shopping season.

Amazon Prime users saved more than $1 billion on millions of deals during the 48-hour event, which was the second year it was held, according to Amazon. On the first day of the holiday kickoff, 25 million items with same-day or next-day delivery were purchased, the company said.

Additionally, Target held its Circle Week the first week of October, in which it offered savings of up to 40% for members of its free-to-join loyalty program.

Recent consumer sentiment readings have also clouded the holiday shopping season. The University of Michigan Consumer Sentiment Index released its final numbers for November just days before Black Friday. It showed that sentiment fell once again from the month before and inflation expectations rose.

Long-run inflation expectations rose from 3% last month to 3.2% in November, the highest reading since 2011 and bad news for retailers.

“Falling consumer sentiment could foreshadow a slowdown in consumer spending,” said Jeffrey Roach, chief economist for LPL Financial. “Since the end of October, we saw a decline in card spending relative to baseline. This is consistent with the view that the consumer is nearing the end of their spending splurge and also explains why the Fed is talking tough but remains unanimous with pausing any further rate hikes.”

But how about this year’s Black Friday and holiday shopping deals? With consumers possibly being more frugal this year, they might be more attuned to just how good different deals are. Rossman said that he thinks the floor for deals is somewhere in the ballpark of 30% off.

“I feel like 10% off or 20% off, it’s not moving the needle as much. I feel like 30% is kind of the baseline for what consumers are almost like demanding with their purchasing decisions,” he said.

It is also worth noting that, despite Black Friday evolving and becoming a bit deemphasized when it comes to holiday shopping deals, the weekend is still a huge one for retailers. It is also a big deal to investors and those watching the stock market because how much shoppers end up spending could be a barometer for the weeks and months to come.

The S&P 500 was up by a modest 1% over the past five days leading up to Wednesday, the last day of trading before the unofficial kickoff of the holiday season. How shoppers behave in the coming weekend will be closely tracked.

Quincy Krosby, chief global strategist for LPL Financial, said that “the market can be affected by any indication that Black Friday doesn’t witness the throngs of consumers out hunting for bargains, or indications that the start to Cyber Monday won’t result in the billions of dollars that are spent online.”

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