While retailers have already ramped up their holiday efforts, Black Friday, the event that officially marks the beginning of the holiday shopping frenzy, is upon us.
The question on everyone's mind: will the volatile economic landscape stifle consumer spending due to inflation and rising debt, and put mounting pressure on shoppers during Black Friday sales?
According to the International Council of Shopping Centers (ISCS), retail sales are still expected to grow 3.8% this holiday season despite economic headwinds.
“This year’s forecast shows the industry is balancing itself out after rapid growth over the last few years, setting retailers up for another successful holiday season,” said Tom McGee, president and CEO of ICSC.
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When it comes to the holidays, does brand loyalty supersede savings, or are there other considerations at play?
According to e-commerce logistics data provider Parcel Monitor, delivery is a big factor, with 52% of U.S. consumers ranking cost of delivery as the most important factor of the delivery experience and only 31.5% of consumers willing to tolerate a three- to four-day delay from estimated delivery dates.
77% of shipment delays in the U.S. during peak season last year were caused by carrier issues — Parcel Monitor
Up to a third of consumers require free shipping, free returns, and/or Buy Now Pay Later to make online holiday purchases — Alvarez & Marsal's Consumer and Retail Group
A trend gaining traction related to delivery is sustainability. Fleet management company, Merchants Fleet, found that 87% of consumers surveyed are concerned about the environmental impact of holiday package deliveries, while 79% are open to seeing package carriers transition from gas-powered to EVs.
This could give an edge to companies like Amazon and Walmart, which are ahead of the pack in EV fleet deployment.
Forrester VP, principal analyst Dipanjan Chatterjee, said sustainability won’t drive demand. However, it will be a cost of entry for retailers.
“During a season notorious for excess and waste, sustainability and environmental stewardship will be salient for many brands and consumers,” he said. “There is a broader expectation that brands acknowledge and address the environmental elephant at the holiday party.”
Save it for the Savings
You can't, however, discount pricing promotions. After all, consumers flock to stores during this time of year in search of savings above all.
Yoni Mazor, CGO of Getida.com, reports that over 75% of consumers are seeking discounts to counteract price hikes.
“I believe price elasticity of demand will apply — when the price of a product increases due to inflation, consumers may reduce their demand for it,” said Mazor. “What a consumer might have paid for a gift last year may have been more than they're willing to pay for that same gift this year.”
As a result of price hikes, basket sizes may be smaller this year, according to Deloitte. The company reports that consumers are less confident in their ability to stay within budget (57% in 2023 compared to 63% in 2022), planning to purchase an average of eight gifts compared to nine in 2022.
McKinsey & Company says this has been the year of promotions, and retailers are working hard to close deals. Personalization is a core tactic to get purchasers through the funnel, and with that, companies are tapping technologies like generative AI to give them the advantage.
“AI is key in personalized promotion. Retailers that have been using it for a while and are continuing to enhance their AI capabilities are able to do it at a different level than those that are not yet taking full advantage. Gen AI is still a wide-open field where a lot of retailers are experimenting with a lot of things.
Gen AI can be used in the front line: when a sales associate approaches someone looking for electronics, for example, gen AI can be used to understand what questions might elicit a good response and if a consumer asks a question, to understand what answers are going to be the most powerful and helpful for that consumer.
Gen AI is also being used to gather consumer comments as a whole and to analyze the themes and reactions that consumers have toward what’s on offer. Retailers are able to quickly gather and synthesize what consumers are saying, almost in real time, then adjust what they’re doing. It’s almost “test and learn” on steroids.” — Tamara Charm, Partner at McKinsey & Company
Technology implementations, however, come with their own set of challenges, particularly during a time of year when many retailers hire an influx of workers to support the traffic growth.
“We see retailers investing in technology to make in-store workers more productive, which means you can manage with a lower overall staffing level,” said Nikki Baird, VP of strategy at retail tech company Aptos. “But even the best technology requires training, especially in the more complex world of omnichannel and just all the roles that the store has to play in general, that it's also not as easy to just throw a new person out onto the floor and expect them to be in any way productive”
Ramping Up Retail Savings Events
With the exception of REI, which gives its employees an additional paid day off on Black Friday to #OptOutside, the overwhelming trend this year is to close on Thanksgiving, but go all out on Black Friday.
Here are event highlights for some of the industry’s largest Black Friday players:
- Sales happening November 19-25, along with Cyber Monday from November 26-27
- Additional savings during Black Friday weekend
- Holiday price matching for select competitor products within 14 days of purchase and for Target products with lower prices later in the season
- Sales happening November 17-25
- New Yes, Best Buy Sells That website highlights the expansive portfolio of products
- Live product demonstrations and advice through TalkShopLive
Dick’s Sporting Goods
- Sales happening November 19-25
- Price matching for competitor-purchased products
- Sales happening November 22-24, with Cyber Monday on November 26
- Three-hour head start for Walmart+ members
- List personalization capabilities added to Walmart.com to save favorite deals
- New wish list and toy registry launching ahead of the holidays
“This is the first holiday shopping season where customers will begin feeling the benefits of our next generation supply chain,” said Walmart in a statement. “That means more for our customers: more of this season’s top food, toys and gifts; more convenient delivery options, and more availability on next- and two-day shipping. These improvements enhance Walmart’s roster of fast, easy pickup and delivery options for Black Friday deals, including curbside pickup, next-day and two-day shipping.”