Shoppers walk past a sale sign as Black Friday sales begin at The Outlet Shoppes of the Bluegrass in Simpsonville, Kentucky November 26, 2021.
Jon Cherry | Reuters
Large retailers are under intense pressure to deliver on Black Friday after several of them reported a drop in sales heading into the holiday shopping season.
Macy’s, target, cabbage, gap and north current spoke of a slump in sales at the end of October and beginning of November. Target lowered its guidance for the holiday quarter and Kohl’s withdrew its guidance, citing slow sales. Macy’s CEO Jeff Gennette said shoppers continued to visit stores and the website during this hiatus, but browsing didn’t turn into buying. best buy CEO Corie Barry said buyers are showing more interest in selling than usual.
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These results illustrate an emerging theme this season: shoppers are waiting for the biggest and best deals – especially when inflation hits their wallets.
“People are willing to wait and be patient,” said Rob Garf, vice president and general manager of retail at Salesforce, a software company that also tracks shopping trends. “The discount chicken game is back and consumers will ultimately win.”
This big appetite for deals fuels higher expectations for a bigger Black Friday weekend. Many major retailers, including Walmart and Target, will remain closed on Thanksgiving. But a record number of people — 166.3 million — are expected to shop over the weekend, which stretches Thursday through Cyber Monday, according to an annual survey by the National Retail Federation and Prosper Insights & Analytics.
That’s nearly 8 million more people than a year ago and the highest estimate since NRF began collecting the data in 2017.
Retailers and industry watchers have been expecting a more subdued holiday season, with sales being driven by higher prices rather than a big appetite for goods. The National Retail Federation is forecasting a 6% to 8% increase in sales, including the rise in near-record inflation.
Travel and experiences are also competing harder for Americans’ wallets as concerns about Covid-19 ease.
Retail executives who have reported profits have spoken of a return to pre-pandemic gift-buying styles. In the past two years, consumers have shopped and bought gifts earlier, worried about shipping delays and shortages caused by a surge in online sales and congested ports.
Again this year, retailers started selling early – but geared them to sell excess inventory and appeal to a value-oriented consumer. Amazon ran a second Prime Day-like sale in October, and Target and Walmart had competing sales around the same time.
But so far, buyers 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 earlier. She said the backdrop is very different from a year ago, when shoppers bought early and worried they might not get all the items on their wishlist.
“That buying impulse just isn’t there this year,” she said. “Your average consumer knows that stock is plentiful and competitively priced.”
She said Best Buy now expects customers to spend more on Black Friday, Cyber Monday and the two weeks leading up to Christmas. The company has extended hours, staffed stores and even timed inventory for that schedule, she said.
Not only do you have money for travel and entertainment, you also have money for needs.
Other factors may also have dampened demand in late October and November. In recent earnings calls, executives at Gap and Nordstrom cited unseasonably warm fall weather that may have inspired consumers not to rush to stores to pick up winter coats or thick sweaters.
Also, some Americans tuned in to the midterm elections — hard-fought races that caught their attention and may have also contributed to economic uncertainty, said Chris Horvers, an equities analyst covering retail for JPMorgan.
But, he added, a weaker start to the holidays has also raised some alarms about consumer health. Retailers have been wary of sharing their hopes for the season — and they’ve alluded to consumers diving into savings accounts and topping up credit card balances, despite reporting stronger-than-feared third-quarter results.
“Not only do you have money for travel and entertainment,” Horvers said, “you also have money for needs.”
Also, he said, when people show up for Black Friday weekend, it’s not all good news.
“If the consumer responds to promotions and buys this week, but stops spending soon after, it will add to retailers’ already existing concerns that the consumer is only shopping when there is a need and only buying when there is a discount.”