It’s the time of year when fiscal decisions need to be made. Should you spend within your means or turn to credit cards? Some consumers choose to splurge during the holidays, while others bargain hunt. This year’s philosophy on holiday spending could be a precursor for the U.S. economy.
Retailers Dropping Prices
Retailers anticipated consumer caution this holiday season and started promoting their deals early. The biggest attraction for consumers was deals under $35.For the first time since 2020, games and toys were on track to be less expensive. And sporting goods, too, were down in price for the first time since 2018.
For example, a Barbie doll Clinic Playset was $32.49 on Target’s website. It sold for $45 in December 2019. And a Lego classic box was selling for $22.49 at Walmart. This set sold for $27.99 in November 2019.
Clothes and accessories are usually the most purchased for the holidays. And for the first time since the pre-pandemic, men’s suits, women’s’ dresses, and outerwear saw prices decrease anywhere from 8 percent to 14 percent.
Consumers Comparison Shopping
Consumers have taken note of the savings, but are still aggressively looking for the best deal. Even though Black Friday discounts were 30–50 percent at major retailers, they could go deeper. Some shoppers will wait until the weekend before Christmas to score additional discounts.
Because Christmas is on a Monday in 2023, there is an additional weekend for shopping. Retailers are expected to drop prices another 10 percent for Super Saturday before Christmas.
Even with all these deals, consumers are researching and comparing prices. They have also become more “choiceful and discerning, which includes buying closer-to-need,” according to Brokerage TD Cowen analysts. In other words, consumers aren’t just buying anything on sale—they have a plan.
In-Store Black Friday Spending
Brick-and-mortar Black Friday was subdued compared to past years. Gone is the urgency of the early-morning door-busters. Consumers are waiting for the next move. They stay home and go online rather than rising at 5 a.m. for the deal.There’s a shift from the hustle and bustle of in-store sales. Brick-and-mortar sales rose over 1 percent compared to 2022.
Consumers aren’t attracted to the waiting in line mad rush of in-store shopping. Shopping at home and conveniently comparing prices is more effective. It all goes back to value-conscious consumers. The experiences and goals that come with shopping have changed.
Cyber Monday Record Spending
Online spending increased 7.5 percent over 2022’s Black Friday. In total, Black Friday sales added up to $9.8 billion, according to Adobe Analytics report. But e-commerce retailers expect this to taper off throughout the rest of the holiday season. Deeper discounts will likely be the result.The day before Thanksgiving generated $5.6 billion in online sales.
On Black Friday, mobile purchases accounted for $5.3 billion. These are speculated to be impulse buys.
Top sellers were electronics, toys and gaming. These sellers correlated to whichever products had the deepest discounts.
Buy Now, Pay Later Financing Increased
Postponing paying for online holiday gifts without using credit cards increased. Buy now, pay later (BNPL) financing was up 47 percent compared to Black Friday 2022. That equaled $79 million in sales in 2023.The buy now, pay later program allows you to receive a purchase immediately but pay for it in a series of equal installments. And although it can be a low or no-interest way to buy a gift, taking on debt is still the result.
Consumerism and the GDP
Holiday purchases don’t contribute a lot to the economy. But overall, personal consumption expenditures are a significant contributor. Personal consumption expenditures comprised 68 percent of the gross domestic product (GDP) in the third quarter of 2023.Consumer expenditures mean big ticket items like automobiles, homes, etc. But, a major expenditure is credit card debt for day-to-day purchases.
Because of consumers’ prominent economic role, investors pay close attention to overall consumer debt. Currently, debt level growth is in line with wage growth, so it’s not raising a red flag. For example, the amount of debt held in the second quarter of 2023, $17.29 trillion, represented a 4.8 percent increase from the previous year.
Consumers Spent Early
Since most retailers make most of their profits during the holiday season, knowing the consumers’ psychological mind frame is essential.When times are good, shoppers spend liberally on gifts. But cutting back, even on gifts, usually happens during an economic downturn. Despite this downturn, sales were up for retailers.
Still, retail sales are not expected to remain strong for the entire holiday season. Sales growth for the holiday season will not be as strong as in 2022. It is forecast to slow to 3.3 percent. This is less than the 2022 six percent growth.
