During this year's Black Friday shopping festival, American consumers and retailers seem to have gone crazy about it
On one hand, in order to attract customers, businesses can only rely on solid "jump off prices" and "fracture prices" to compete for price reduction and internal competition; On the other hand, consumers who have been suffering from high inflation for a long time and have always kept their wallets tightly closed have finally arrived at the "golden window" of holiday season discounts, waiting for greater discounts on goods, and thus began to consume recklessly. So, people also saw an unprecedented online sales peak on Black Friday
According to data released last Saturday by American e-commerce research firm Adobe, on Black Friday alone, American shoppers spent a record $9.8 billion online, a significant increase of 7.5% from last year. Shopify, an e-commerce platform, also reported record breaking global sales over the weekend - the platform's "Black Friday" sales exceeded $4 billion this year, a 22% increase from last year.
The "Consumption Downgrading" under the Hot "Black Five"
Against the backdrop of sustained inflation and almost depleted government stimulus funds, choosing cheaper goods seems to be becoming the top priority for American consumers.
A study by global information giant McKinsey found that nearly 80% of consumers hope to "downgrade their spending" during this year's holiday shopping, replacing planned purchases with cheaper alternatives, or simply giving up on purchases.
Behind the latest hot sales data of "Black Friday" is actually the result of merchants being forced to significantly lower prices and consumers being satisfied - consumers would rather suppress their consumption needs in the past few weeks or even months, and only wait for the window of the "Black Friday" holiday promotion season to come.
According to the National Retail Federation of the United States, it is expected that over 182 million people will shop during Black Friday and Cyber Monday sales, a 9% increase from last year and a new high since tracking began in 2017.
Adobe's report found that the best-selling products of Black Five are electronic products such as smartwatches and televisions, as well as toys and games. According to Vivek Pandya, an analyst at the institution, these best-selling products are directly related to the products with the highest discounts.
Adobe's statistics show that the top five popular products on Black Friday are KidKraft toy sets, Mini Brands toys, televisions, smartwatches, and headphones.
According to data from Adobe Analytics, the online product discounts for Black Friday this year are greater than a year ago, especially for toys and clothing. Among them, the average discount on toys reached 28%, compared to 22% in the same period last year; The average discount rate for electronic products is 27%, which is basically the same as the same period last year. In terms of clothing, shoppers saw an average discount of 24%, far higher than last year's 19%.
Rob Garf, Vice President and General Manager of Retail Business at Salesforce, pointed out that Black Friday's strong online sales indicate that shoppers are investing more time and effort in carefully selecting the lowest cost and most cost-effective products. The company tracks e-commerce service data flowing through its business cloud.
Garf pointed out, "Although retailers' holiday promotions started earlier this year, there weren't many discounts initially. However, consumers were very patient and hardworking, playing a game waiting for discounts. In the end, they won."
Gregory Daco, Chief Economist of Ernst&Young, stated in a report that although inflation cooled in October, the perception of "cost fatigue" still exists, which has suppressed earlier consumer desire to consume. Cost fatigue refers to the consumer's perception that all costs are higher than before the pandemic.
Merchants are all caught up in the wave of discounts
From a business perspective, American retailers have actually been preparing for a challenging holiday season for a long time. Previously released data showed that US retail sales declined by 0.1% month on month in October, marking the first decline in nearly 7 months.
Many executives have stated that after two years of consumer spending stimulated by the pandemic, American retailers are now facing more carefully selected consumers. More and more American consumers hope to make purchases at the best prices and are more enthusiastic about searching for these discounts online rather than offline. What retailers can only do is to adapt to this transformation by offering greater price reductions during this year's discount season.
In the end, people undoubtedly can see that most retailers such as Best Buy and Lloyd's have higher discount rates than before, while retailers such as Target and beauty retail giant Ulta Beauty have launched flash sale promotions, even offering 24-hour discounts for certain brands and products.
Macy's CEO Jeff Gennette told investors this month that retailers from Macy's to Amazon had already launched promotional activities in October and may offer additional discounts as Christmas approaches.
Special offers reflect fierce competition among retailers, who face enormous pressure to attract American consumers who are tired of the still high inflation rates of many products. "People are more focused on cost-effectiveness," said Barbara Kahn, a professor at the Wharton School of Business at the University of Pennsylvania. "People are consuming, but their consumption has become more conservative."
Neil Saunders, Managing Director of GlobalData, said, "Shoppers are looking for the products they truly want and need, rather than simply impulsively buying a lot of things. This may not necessarily be a good thing for retailers."
In fact, despite the sincerity of merchants, many consumers are still sensitive to prices and are already facing financial difficulties. More and more consumers are choosing the "buy first, pay later" transaction method. According to an Adobe survey, approximately $79 million in sales during the Black Friday period came from consumers who chose to pay first, an increase of 47% from last year.
Is the US economy really quiet over time?
Looking back at the retail sales situation in the United States this year, it is not difficult to find that consumers are spending money at a different pace than in the past few years. At that time, the characteristic of consumption was the extravagance after the epidemic.
But targeting retailers in the upper middle class of the United States, sales data has seen the largest decline in two years recently. The US economy relies on consumer power to resist recession. Usually, wealthy shoppers have a huge impact on consumer spending, not only because they have money to spend during strong economic times, but also because they tend to reduce spending faster when the economy is under pressure. But wealthier Americans have reduced their spending on the eve of this year's Black Friday shopping season, which may actually be a worrying sign.
Bloomberg has previously created a wealth index to represent the spending levels of high-income groups, which includes 30 large retailers and brands across 10 categories. Since January, the sales performance of retailers and brands in the index has significantly declined, and has recently further deteriorated. During the three months from August to October, 70% of companies experienced a decline in sales, with a median decrease of 14%, the worst performance in two years.
Best Buy CEO Corie Barry recently stated, "In the recent macro environment, consumer demand has become more uneven and difficult to predict."
Consumption accounts for over 70% of the US economy. At present, despite the booming sales data of Black Friday, a more worrying risk is whether consumers will take advantage of the price reduction in this round of promotion season to overdraw their future budget in advance? Can this level of consumer enthusiasm continue? With further pressure on household expenditure growth, the turning point of US GDP growth may still come.
Currently, personal savings in the United States are falling from their peak during the pandemic, and although inflation rates are slowing down, the prices of many items are still significantly higher than a few years ago. The rise in interest rates has also pushed up housing and car prices, forcing consumers to make choices.
Meanwhile, as excess savings are gradually being consumed, Americans are also increasingly relying on credit cards for consumption. The third quarter household total debt level report released by the New York Fed earlier found that credit card total debt has reached $1.08 trillion. Due to the significant interest rate hike by the Federal Reserve, the costs for borrowers are also significantly increasing: the average annual credit card interest rate in the United States has exceeded 20%, which may also become a potential headwind.
It is not difficult to foresee that how the Federal Reserve will gradually exit the tightening cycle in the future may also depend on a series of business activities and feedback from consumer demand.
If the hot numbers of "Black Five" are a true reflection of the recovery of American consumption, then the Federal Reserve will undoubtedly maintain a relatively hawkish tone; But if the popularity of the holiday season is just a fleeting glimpse and leads to a significant cooling of future retail data, then people's concerns about whether the prospect of a soft landing can be established will undoubtedly intensify.
Of course, Michelle Meyer, the Chief Economist of the Mastercard Institute of Economics in the United States, is still relatively optimistic at present.
Meyer said that after experiencing the chaotic shopping experience in recent years, consumers are also returning to a more normal shopping rhythm. She stated in an interview that this year's sales forecast indicates a "return to a more balanced economy," with the US unemployment rate still low and consumers still having the purchasing power.