Black friday: retail trends and customer insights
Looking Back at 2022
The name “Black Friday” comes from retailers moving into profitability (due to sales), signified by recording profits in black ink. Without going much more into history let’s just jump to the previous year as it is the most relevant for analysis of upcoming trends.
According to Adobe Analytics, Black Friday spending reached $9.12 billion, marking a 2.3% year-over-year increase (2022). Cyber Monday sales garnered $11.3 billion, reflecting a year-over-year jump of 5.8%.
Despite the pandemic and economic uncertainty, Black Friday in 2022 was successful, with 88 million Americans shopping online. The average order value increased by 9%. Online sales grew by 5% year-over-year.
Outlook for 2023
The holiday season is expected to break sales records, but spending may focus on essential items and discounted products. Shoppers are looking for deals and practical purchases, with electronics sales potentially dampened due to the absence of significant product releases.
From the retailer’s perspective
Retailers Prioritizing Experiences: The Hybrid Approach
Retailers are revolutionizing the in-store experience by creating a hybrid of online and offline shopping. Instead of traditional aisles of merchandise, the new shop floor is designed to offer hands-on experiences. Customers can now process transactions online, allowing for direct-to-home shipping. This innovative approach not only enhances customer engagement but also streamlines the purchasing process.
The Emergence of a Month-Wide Shopping Season
Retail giants like Target and Walmart are redefining the traditional Black Friday rush by introducing month-long deals. Target has led the way, offering enticing discounts throughout the entire month, with Walmart following suit starting on November 8th. By extending the sale period, retailers are providing customers with more flexibility and convenience in their shopping experience.
A Survey-Backed Strategy: Catering to Crowd-Averse Shoppers
Recent surveys have indicated that shoppers are less inclined to endure crowded stores during major sales events. This insight has driven retailers to rethink their Black Friday strategies. The decision to extend the sale period aligns with the preferences of modern consumers, who value a more relaxed and spread-out shopping experience. By accommodating this shift, retailers are not only meeting customer expectations but also optimizing their sales potential.
Live Stream Shopping: A Page from QVC’s Playbook
Taking a page from the QVC playbook, retailers like Target are implementing live-stream shopping sessions. This innovative approach allows brands to directly engage with consumers in real-time, showcasing products, demonstrating features, and offering expert advice. By leveraging the power of live streaming, retailers create an interactive and personalized shopping experience, bridging the gap between in-store and online shopping.
Interest Rates Affecting Borrowing Capacity for Retailers
High interest rates increase the cost of borrowing for businesses. This leads to a credit shortage as lenders become more cautious. Additionally, businesses have reduced their capacity to invest in stock due to constrained liquidity resulting from higher borrowing costs.
From the Consumers’ Point of View:
Based on market conditions about spending
An inflation cooldown means the consumer purchasing power will be higher as with the same value for money they can purchase a higher amount of basket of goods, thus boosting consumer demand.
2. Consumer spending
As inflation cooled, both real and nominal consumer spending increased slightly year-over-year. The real spending change rate hovered around 3%, up from 1% in May 2023. Out-of-home entertainment and cosmetic stores saw the largest increases in real spending, followed by the travel segment.
A steady increase in consumer spending is an indicator that for black Friday sales, people will be highly motivated and will have the purchasing power to support that increased enthusiasm.
3. Consumer sentiment
Even though there are fears of war, the overall consumer optimism for the year remains positive overall. This is due to the facts stated above, lower inflationary pressure, and high disposable income. However high interest rates mean that the ability of businesses to capture this demand is still in question/contention.
Despite a slight drop in optimism during the summer, US consumers remained cautiously optimistic about the economy. In the third quarter of 2023, 33% of consumers felt optimistic, while 44% had mixed feelings. Baby boomers showed the most significant increase in optimism, while millennials saw a decline. High-income consumers reported the largest decline in optimism compared to other income groups.