Shoppers walk past a sale sign as the Black Friday sale begins at The Outlet Shoppes of the Bluegrass in Simpsonville, Kentucky, November 26, 2021.
Jon Cherry | Reuters
Major retailers are under intense pressure to deliver on Black Friday after a number of them reported a slowdown in sales ahead of the do-or-die holiday shopping season.
Macy’s, Target, from Kohl, Hole and Nordstrom spoke of a lull in sales in late October and early November. Target cut its outlook for the holiday quarter and Kohl’s retracted its forecast, citing sluggish sales. Jeff Gennette, CEO of Macy’s, said shoppers continued to visit the stores and website during that break, but browsing did not turn into buying. Best Buy CEO Corie Barry said shoppers are showing more interest in selling than usual.
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Those results illustrate an emerging theme this season: shoppers cling to the biggest and best deals, especially as inflation hits their wallets.
“People are willing to wait and be patient,” said Rob Garf, vice president and general manager of retail for Salesforce, a software company that also tracks shopping trends. “The game of cheap chicken is back and the consumer will ultimately win.”
That big hunger for deals is fueling higher expectations for a bigger Black Friday weekend. Many major retailers, including Walmart and Target, remain closed on Thanksgiving. Still, a record number of people — 166.3 million — are expected to shop during the weekend, which spans Thursday through Cyber Monday, according to an annual survey by the National Retail Federation and Prosper Insights & Analytics.
That’s nearly 8 million people more than a year ago and the highest estimate since NRF began tracking the data in 2017.
Retailers and industry viewers have been anticipating a more muted holiday season with sales driven more by higher prices than a massive appetite for goods. The National Retail Federation forecasts a 6% to 8% increase in sales, including the boost from near-record inflation levels.
Travel and experiences are also fiercely competing for Americans’ pockets as concerns about Covid-19 fade.
Retail executives who have reported earnings have spoken of a shift back to the pre-pandemic style of gift buying. Over the past two years, consumers have shopped earlier and bought more gifts due to concerns about shipping delays and out-of-stock due to a spike in online sales and overcrowded ports.
This year, retailers again started selling early, but focused on selling excess inventory and serving a more value-oriented consumer. Amazon threw a second Prime Day-like sale in October, and Target and Walmart had competitive sales around the same time.
Still, shoppers are in no hurry to buy so far.
Barry, Best Buy’s CEO, said the company’s October sales were the lowest in the quarter compared to last year. 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 wish list.
“That impulse to buy just isn’t there this year,” she said. “The average consumer knows there’s plenty of stock 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. The company has extended hours, staffed stores and even timed inventory for that schedule, she said.
Other factors may also have depressed demand at the end of October and November. In recent earnings calls, Gap and Nordstrom executives referenced unseasonably warm weather in the fall, which may have prompted consumers to avoid running to stores to buy winter coats or heavy sweaters.
In addition, some Americans were engaged in midterm elections — highly contested races that caught their attention and may also have contributed to economic uncertainty, said Chris Horvers, an equity research analyst who covers retail for JPMorgan.
But, he added, a weaker start to the holiday season has also raised consumer health alarms. Retailers have been cautious in sharing hopes for the season — and they’ve alluded to consumers purging savings accounts and mounting credit card balances, despite stronger-than-dreaded third-quarter results.
“Not only do you have dollars shifting to travel and entertainment,” Horvers said, “you also have dollars shifting to needs.”
Plus, he said, it’s not all good news when people show up for the Black Friday weekend.
“If consumers respond to promotions and stores this week, but stop spending soon after, this will reinforce the concern retailers already have that consumers only shop when they need it and only shop when there is a discount.”