Black Friday sales increase, but holiday spending looks shaky

Consumers showed their resilience once more for Black Friday 2023 amid global economic turmoil as sales increased across multiple channels, categories and markets. Shopify and Adobe all shared positive year-on-year increases: Shopify reported a 22% increase in sales from brands using its platform while Adobe Analytics shared a 7.7% increase in e-commerce sales over the total Black Friday weekend. In addition, year-on-year foot traffic for brick-and-mortar stores also saw an increase, albeit a small one, of 1.5% on Black Friday weekend.

Adobe’s annual report, which covers 100 million SKUs in 18 retail categories, found five categories to be the largest contributors to this year’s sales - clothing, electronics, furniture, toys and groceries. These contributed to 60% of the €101 billion in sales from 1 - 27 November, which includes pre-Black Friday discounts during the month. By the end of the shopping weekend, discounts climaxed at 31% for electronics, 27% for toys, 23% on apparel and 21% on furniture. Small appliances and electronics like TVs and smartwatches also did particularly well while beauty and personal care saw Black Friday and Cyber Monday sales for beauty saw a 13.3% increase in year-on-year sales, as reported by RetailNext. 

Performance footwear’s discounts led to high sales

Brooks Running was one of the performance shoe brands that reported a highly successful Black Friday/Cyber Monday period, enjoying a 14% record boost in sales on Cyber Monday alone. Omnia researched Dutch pricing data for running shoes to see what could have caused the increase in sales. Black Friday and Cyber Monday offers already began the Friday beforehand but the number of offers increased over time with the peak on Black Friday. Discount offers remain over the weekend and return to lower levels two days after Cyber Monday. Compared to the month before, Black Friday and Cyber Monday are seen as highly competitive days. On selected items, there is an average discount of 18.5%. Where some retailers and brands even go up to a discount of 28.7% on average.

During this period we see different strategies of different retailers coming to life. Where some retailers and brands rely more on heavily promoted products, others that maintain their competitive strategies aren't able to discount that much. A trend we detect in the running shoe business is that brands, on average, have higher discounts, showcasing that a D2C strategy could be highly lucrative over this period.

What can retailers expect about festive season spending?

The state of consumer spending over Black Friday weekend should not fool retail leaders. Stubborn inflation and high food and gas prices are very much a constant monkey on the shoulders of household budgets and, even for wealthier consumers, have eaten into expendable income. Adobe reported a 14% increase in buy-now-pay-later services compared to this period last year. Cyber Monday saw a massive 42% increase in the use of these services as consumers moved to act resourcefully to make purchases. In addition, US credit card debt exceeded $1 trillion in November. 

Overall, although Black Friday spending was better than expected, a booming holiday shopping season will likely not be on the cards. Retailers and brands expect to see year-on-year increases, but it won’t be because of the usual holiday shopping explosion: Inflation has resulted in all-round price increases, making everything more expensive than last year, resulting in consumers spending more money for the same or less. Single-digit increases in spending of 3 - 4% are predicted, according to the US National Retail Federation, in comparison to 2021’s 12.7%.

Average selling price across all categories: 2022 vs 2023:

Source: Salesforce data published by Forbes

Consumers expect to spend, but this will be largely due to the fact that consumers feel obliged to buy gifts over this period, and not because they want to go all-out on multiple gifts, holidays and treats for themselves. “They’ve been very resilient. They will shop. They have obligations to family and other loved ones that they’re going to fulfil the gift list for," says Michael Brown, a partner at Kearney.

In the UK, festive season shopping, which encompasses both November and December, has not started as strong as in previous years: The British Retail Consortium and KPMG report that retail sales in November totalled 2.7% compared to 4.5% in 2022 while non-food items experienced a decline altogether. Moreso, PwC predicts a 13% decline in festive season shopping in the UK market, as reported by the Business of Fashion. As a result, UK retailers are expected to discount heavily in January 2024 to offset sitting stock that should’ve sold during this year’s fourth quarter. 

How can retailers make the most of December deals?

McKinsey suggests that providing value will likely be the best strategy for retailers and brands to get consumers to shop which could mean offering same-day delivery, free shipping, product bundles, or sharper discounts. “People are heading into the new year thinking inflation is bad, interest rates are tough, there’s geopolitical conflict in the world, and that’s why consumers are so negative. They’re in betwixt, and their uncertainty is what’s keeping them from splurging,” said Kelsey Robinson, senior partner at McKinsey.

In terms of sales channels, smartphone shopping for e-commerce sales accounted for a 54% majority, meaning an advertising restructure targeting smartphones via social commerce may result in higher sales. Targeting social commerce buyers may also lead to an entirely new stream of customers for future purchases.