Black Friday struggled to tempt US consumers

It’s not just you. This holiday season feels a little ho-hum. Sure, tree decorations still sparkle, hot chocolate is still sweet and the wind is a little chillier. But the shopping — the crux of American winter holiday culture —  hasn’t started off so bright.

On Black Friday, retail spending increased by just 2.5% from last year, according to Mastercard SpendingPulse. Online sales increased 7.5% to $9.8 billion, and the overall weekend is expected to reach at least $37.2 billion in spending, an increase of 5% from last year, according to Adobe Analytics. TD Cowen went as far as lowering its holiday forecast in a note on Friday to 2%-3% year-over-year growth versus a previously estimated 4%-5% because of the slow start to the season.The figures don’t suggest any type of economic collapse. But they certainly underscore the challenge facing retailers that can’t seem to convince shoppers to snatch up mediocre deals. Shoppers are smart; businesses need to be smarter. 

Retailers have already warned investors that this holiday season might end up softer than previous years. While inflation is slowing down, consumers are still feeling the pressure of increased prices. Walmart Inc. Chief Financial Officer John David Rainey told investors in an earnings call earlier this month that the company saw a “sharper falloff” in consumer spending toward the end of October. He told Bloomberg News the company had become “more cautious on the consumer” over the last quarter. That caution echoed throughout recent earnings reports from retailers ranging from Lowe’s Inc. to Target Corp. 

Clearly, consumers continued to spend this weekend, but they weren’t biting as much as companies had hoped for one big reason: They didn’t feel like they were getting items for a steal. Coming into the holidays, retailers — such as Gap Inc. and Target Corp. —  planned for more balanced promotions compared to last year. In 2022, they offered deeper discounts to quickly whittle down their excess inventory. This year, as they tried to better mirror consumer demand by having fewer goods, big price cuts to move merchandise weren’t necessary. Instead, businesses have invested more in personalized promotions for rewards members and strategically discounted goods in hopes shoppers would be compelled to buy while also not squeezing retailers’ profit margins, said Julie Van Ullen, chief revenue officer of cash-back shopping platform Rakuten Rewards, a subsidiary of internet services company Rakuten Group, Inc.

So far, modest markdowns  have resulted in a dull holiday deals season for shoppers. As much as excessive buying has come to define what it means to be “American” for many, discount hunting has also become intrinsic to consumption in the US.

The internet, with price-tracking tools and endless social media platforms, has made it easier than ever to find out quickly if you’re being duped on a sale. Retailers don’t fully appreciate how much more savvy consumers are these days, especially when they’re more cautious about their spending.It didn’t take long for shoppers to take to social media and share complaints about the paltry discounts over the weekend served up as post-Thanksgiving Day deals. A 16% discount on an Xbox Series S Starter Bundle from Walmart Inc. doesn’t quite inspire the type of fervor that made Black Friday a store frenzy. 

As another shopper put it, 30% is not a Black Friday deal; it’s a regular sale. It’s a relief that the country no longer has to reckon with the violence and aggression of past doorbuster store events. There should be little nostalgia for shopper fights over a 40-inch television at Walmart. The pandemic got many people comfortable buying online, and retailers invested a lot into their loyalty programs, apps and fulfillment networks. That has resulted in a safer Black Friday and increased price competition, which is a benefit for everyone.

But now, businesses will have to think more creatively. Heading into the new year, a big question that companies need to answer is: How can we excite shoppers during the 2024 holiday season? Given that it begins online in the fall with Amazon Prime Day and ends in December, they’ll  need to think of something that will last but won’t upend their bottom lines. Maybe it’s adding new services like gift wrapping to online orders. Or possibly adding more bundled items. For example, if a bathrobe and a pair of slippers typically go for $60 and $40, respectively, but bundled together it’s $80, shoppers may be more inclined to throw it in their carts. Perhaps it’s Target Corp. offering a free cup of Starbucks hot chocolate for rewards members before they stroll their aisles for gifts.