Let’s rewind a few months to late spring. Consumers were blessed with discounts as retailers were attempting to shed inventory ahead of the holiday shopping season.
So what should retailers’ discount strategy be going into Black Friday—the traditional start to the holiday shopping season—amid inflationary pressures? Well, shopping events from earlier in the year might offer some insight into how consumers are approaching Black Friday.
Hot discount summer: Amazon held two Prime Day shopping events this year: one in July, and the other earlier this month. The first Prime Day and its competing sales events were largely successful, as total online retail sales in the US during the event surpassed $11.9 billion, according to Adobe Analytics data.
- That was an 8.5% bump in overall e-commerce spend generated compared to 2021’s event.
- The top categories were consumer electronics, home goods and Amazon-branded devices, per Amazon. And about 58% of orders were for items under $20, according to Numerator data based on a survey of 21,306 households.
On the other hand, Amazon’s second Prime Day event, dubbed the Prime Early Access Sale, didn’t see the same success. Although it sold over 100 million items during the two-day event, that was 3x fewer products than the July event.
On the other, other hand, Target’s second Deal Days event of the year, which ran a week ahead of the Prime Early Access Sale, gave the company more foot traffic nationwide—a 3.2% increase compared to the previous week, according to Placer.ai.
- The October Deal Days drew almost 28% more average daily visits to Target stores than in 2021, and around 57% more daily visitors per venue than in 2020.
“The rationale behind Target Deal Days and Amazon Early Access is similar to Black Friday holidays in the past—consumers respond when they think they're getting a better deal than they usually would,” RJ Hottovy, head of analytical research at Placer.ai, told Retail Brew. “Retailers like Target have figured out that consumers respond well to these types of deals—particularly when they’re trying to stretch household budgets—which is one of the reasons Target was so successful this year.”
Other major retailers, like Macy’s and Walmart, used discounts earlier this year to clear out inventory, with the latter tossing out its rival sales event this year. Walmart has said that higher-income households are trading down on items like groceries, which raises concerns that consumers might not spend as much on gifts, decor, and other holiday products.
- During the second week of July, 46% of units were on promotion, compared to 41% during the fourth week of November 2021, which starts the holiday shopping season.
So what should retailers do? Hugh Fletcher, global marketing director and thought leadership lead at Wunderman Thompson Commerce, believes companies will have to work much harder to encourage Black Friday spend, but the pressure felt by brands, retailers, and marketplaces doesn’t come without a potential opportunity.
- Overall spending per person last Black Friday was on the rise at $363.09 in 2021, compared to the 2020 average of $348.34, per Wunderman Thompson.
- And while overall per person Black Friday spend is expected to drop up to 50% this year, more than three quarters (76%) of shoppers say their proportion of online spend will increase this year as they look for the best deals, range, speed, and convenience offered by large-scale marketplaces like Amazon and eBay.
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“They all now have many more channels at their disposal and must take a wise approach to meet shoppers’ demands,” Fletcher said. “Fusing together deals and discounts across different platforms can offer a foundation to reach millions and on a global scale.”
As for categories, clothing, toys, and technology are some of the most frequently purchased and heavily discounted items during the holidays. Gaming and entertainment products were also prominent in the list of top purchases last year, Fletcher said.
- This should not come as a surprise, given 59% of US consumers last year said that their No. 1 reason for shopping during Black Friday was buying holiday gifts.
- And Fletcher predicts that more essentials may be bought this year, given that last year, 44% of consumers bought food and clothing items, while 38% purchased essential household items. “We may see this percentage grow with cash-strapped consumers waiting for Black Friday for the best deals,” he said. The key this year for retailers is to ensure product availability, particularly in these categories consumers are likely to shop.
“With consumers more deal-hungry than ever, retailers will need to dig deep into their margins to give consumers the right price to make them part with their money, which, in turn, will impact just how profitable Black Friday is for them,” Fletcher continued.