Retailers are under pressure to turn deep discounts into big sales this Black Friday

Shoppers walk past a sale sign as Black Friday sales begin at The Outlet Shoppes of the Bluegrass in Simpsonville, Kentucky, November 26, 2021.

John Cherry | Reuters

Major retailers are under intense pressure to deliver on Black Friday after many reported slowing sales as the “do-or-die” holiday shopping season approaches.

MessiAnd the targetingAnd the kohlAnd the difference And the Nordstrom You talked about a slump in sales in late October and early November. Target cut its forecast for the holiday season and Kohl’s withdrew its forecast, citing sluggish sales. Macy’s CEO Jeff Genet said shoppers still visited its stores and website during that lull, but browsing did not turn into buying. best buy CEO Cory Barry said shoppers are showing more interest in sales than usual.

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These findings illustrate an emerging theme for the season: Shoppers are seeking the biggest and best deals—especially as inflation hits their wallets.

“People are willing to wait and be patient,” said Rob Garff, vice president and general manager of retail at Salesforce, a software company that also tracks shopping trends. “The chicken discount game is back and consumers will win in the end.”

This surge of deals is fueling higher expectations for an even bigger Black Friday weekend. Many major retailers, including Walmart and Target, will remain closed on Thanksgiving. However, a record number of people — 166.3 million — are expected to shop over the weekend, which runs from Thursday through Cyber ​​Monday, according to an annual survey by the National Retail Federation and Prosper Insights & Analytics.

This is about 8 million more people than last year and is the highest estimate since the NRF began tracking the data in 2017.

Consumers are becoming more selective in how they spend

Retailers and industry observers had been expecting a quieter holiday season with sales boosted more by higher prices than by merchandise. The National Retail Federation expects sales to increase 6% to 8%, including an uptick from nearly record high levels of inflation.

Travel and experiences compete more fiercely for Americans’ wallets, too, as Covid-19 fears fade.

Retail executives who reported earnings spoke of a shift to a pre-pandemic pattern of gift-buying. In the past two years, consumers have been shopping early and spreading gift purchases due to concerns about shipping delays and out-of-stock caused by surging online sales and port congestion.

This year, retailers started their sales early again — but directed them toward selling excess inventory and catering to the more value-oriented consumer. Amazon ran a second Prime Day-like sale in October, and Target and Walmart had competing sales around the same time.

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Until now, shoppers were in no hurry to buy.

Best Buy CEO Barry said the company’s October sales were the slowest in the quarter compared to a year ago. The background, she said, is very different than it was a year ago, when shoppers bought early and worried they might not get all the items on their wish list.

“That buying momentum just isn’t there this year,” she said. “The average consumer knows there is plenty of inventory and it will be competitively priced.”

She said Best Buy now expects customers to spend more during Black Friday, Cyber ​​Monday and the two weeks leading up to Christmas. She said the company has extended business hours, and has made stores and even inventory on time for that schedule.

Not only are you diverting money into travel and entertainment, but you also have dollars turning into necessities.

Chris Horvers

JPMorgan Analyst

Other factors may have dampened demand in late October and November as well. In recent earnings calls, executives at Gap and Nordstrom pointed to unusually warm weather in the fall, which may have inspired consumers to stop running to stores to buy winter coats or heavy jackets.

In addition, some Americans have been watching the midterms — the highly contested races that have drawn their attention and may also have contributed to economic uncertainty, said Chris Horvers, an equity research analyst who covers retail at JPMorgan.

But, he added, the weaker start to the holidays also raised some alarms about consumer health. Retailers were cautious when sharing their hopes for the season – and they hinted at consumers dipping into savings accounts and building up credit card balances, despite putting up stronger-than-feared results for the third quarter.

“Not only is there money going into travel and entertainment, there are also dollars going into needs,” Horvers said.

Plus, he said, it’s not all good news if people show up on Black Friday weekend.

“If a consumer is responding to promotions that week and stores but stops spending shortly thereafter, that will reinforce that concern retailers already have that the consumer is only shopping when needed and will only shop when there is a discount.”

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