Your Black Friday bargain is struck somewhere in the Pacific
Don't count on that Black Friday bargain.
This holiday season, stores will not be competing on price — the battleground will be availability. With shoppers buoyant (for now), there is little need to simulate demand, while supply shortages and higher shipping and labour costs will push retailers to protect margins. That all adds up to fewer doorbusters.
Already there is evidence that deals will not be so plentiful. Stacey Widlitz, of SW Retail Advisors, tracks 60 chains across the United States and Europe. At more than 90 per cent of them, she says, promotions are down compared with 2020, when they were already being reined in. Data from IRI show not only fewer special offers across most major US non-food categories than in 2019, but also shallower discounts.
There is still time for televisions and bath towels to hit shelves before Thanksgiving. But in the US, availability in hot categories such as electronics and toys is already patchy. Toys are a flashpoint in Britain, too, owing to logjams at the busy port of Felixstowe.
Big retailers such as Walmart and Target are best positioned to weather the supply crisis, as they can place vast orders earlier than other stores and even charter their own shipping vessels. But smaller chains may struggle to secure enough stock. That doesn’t bode well for choice, or a frenzy of special offers.
Even without clogged supply lines there is another good reason for sellers to scale back Black Friday: to avoid a pile-up of online orders.
Although digital demand has fallen as malls and high streets have reopened, it is still running higher than before the pandemic. US online retail sales are expected to be up almost 60 per cent between now and Christmas Eve, compared with 2019, according to Mastercard SpendingPulse. A surge in deal-hunting on laptops and mobiles would put enormous strain on warehouses and delivery networks, even before factoring in labour shortages. One way to cope is to offer more kerbside pick-up; another is to diffuse demand over a longer period.
Fortunately for stores, it looks like consumers are already adapting. People are heeding chains’ advice to buy early to avoid disappointment. Some 51 per cent of the Americans surveyed by the NPD Group plan to start their holiday shopping before Thanksgiving.
That may explain why we are seeing some tactical promotions now. In case you haven’t noticed, October has become the new November. If big retailers have already secured enough stock to sell at an eye-catchingly low price, why not steal a march on rivals, particularly if their deliveries are stuck in the Pacific?
Amazon.com kicked things off back in 2020, holding its Prime Day bargain bonanza in October. It shifted the shopping holiday back to June this year, but the online giant is still offering what it describes as “Black Friday-worthy deals” ahead of November. These include almost a month of promotions on beauty products, to siphon away buyers who would typically head to department stores for make-up and skincare gifts.
Target has also been holding early offer days. And on Sunday more than 30 retailers including Macy’s Inc and Guess? Inc took part in a new 10/10 shopping holiday. Perhaps as a taste of things to come, some participants had to pull out of the livestreamed event at the last moment because of a lack of inventory.
Getting ahead is a wise move, because there is a real risk that consumer demand evaporates between now and Thanksgiving. In Britain, the prospect of higher food and fuel bills is already taking its toll on confidence. With inflation ratcheting up in the US and stimulus benefits receding, we could see fragility among American shoppers, too.
But pulling back on Black Friday could offer another silver lining for retailers dealing with the existing supply strains. If they can condition consumers to expect fewer deals in the future, the end result will be fatter margins. While some shoppers will hold out for bargains, many are already getting used to paying more for what they want. Companies should capitalise on this environment to reset their customers’ mindsets and their own earnings.
I have long argued that there is little reason for the American-born shopping holiday to to exist in Europe — all it does is sap profits as products that would have been sold at full price get needlessly marked down. It will be much harder to dislodge across the Atlantic, where the event is embedded in US consumer DNA.
Right now, groups such as Nike Inc and Bed Bath & Beyond Inc are suffering from the delays and shortages. But eventually everything from sneakers and lotions to dolls and dresses will be flowing through trade routes again. Being able to sell more of this stock at full price would be a lucky way for businesses to leave behind the great supply-chain meltdown of 2021.
• Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries