Black Friday Sales Numbers Hit Record Highs Despite Fears Of Recession
- Many retailers warned of a weak holiday sales period due to high inflation.
- Online sales were up 2.3% compared to 2021, with $9.12 billion spent online.
- Inventory levels are still a concern with many retailers, we have to wait and see which retailers won and lost at earnings time.
Most experts were not expecting good news from Black Friday. Optimistic analysts hoped that consumers would show up and spend a bit of money, given how high inflation has been changing shopping habits this year. But the early reports show mostly good news for retailers, as sales easily surpassed expectations. Here is a look at the current Black Friday sales data.
Expectations of a soft holiday season
Major retailers forecasted lower-than-average sales for Black Friday 2022 due to inflation and the Federal Reserve’s interest rate hikes. Inflation put pressure on consumers in the form of higher prices for goods, and interest rate hikes increase the interest rate on consumers’ credit cards. A slowdown in spending was present long before Black Friday, causing many retailers, including Target, to forecast a less-profitable Black Friday.
Ultimately, however, shoppers showed up to buy, very good news for retailers. Steeper-than-usual discounts and the option to “buy now, pay later” helped shoppers stretch their budgets and limit the use of credit cards. Some retailers offered online-only deals that encouraged shoppers to avoid the stores and stay home, making great deals more accessible than ever.
Black Friday statistics
The data has yet to land for in-person sales, but this year’s Black Friday saw a 2.3% increase in online sales from 2021. An estimated total of $9.12 billion was spent online on Black Friday, with shoppers taking advantage of various services to help them pay for their purchases and avoid lines in the stores. The National Retail Federation and Prosper Insights & Analytics reported a record 196.7 million consumers shopped both online and in stores between Thanksgiving Day and Cyber Monday. However, even though there was an increase, it fell short of the increase of 8.6% in 2021 and 32% in 2020.
Online toy sales increased 285% compared to a single average day of sales in October, which could be good news for Hasbro, which has been hurting this year. Another bright spot is electronics, with the category as a whole up 19% as of Friday evening. Additionally, smart home electronics and audio equipment increased by over 200% compared to an average day in October. We will have to wait to hear from Best Buy about how this impacted the store’s sales.
Curbside pickup was lower than the year before, according to Adobe Analytics. The service was used for 13% of online orders, a drop from 21% in 2021. As for inventory levels, Inna Kuznetsova, CEO of supply chain optimization firm ToolsGroup suggested that inventory levels would be improved on a case-by-case basis. Some stores will benefit from strong sales, which will allow them to reduce any inventory backlog, while other stores will continue to struggle with inventory levels into 2023.
Interpreting the data
Sales were up, but this is most likely due to retailers offering deeper-than-usual discounts to clear out excess inventory. Typically, Black Friday consists of selling a few select items at a lower-than-average price, with those items being specifically manufactured for sale. The goal is to offer impressive sales on a few select items to attract consumers into stores and hope they buy other merchandise marked down less or not at all.
For example, a store might offer a sale on a new television to get consumers into the store assuming that same television buyer will buy more during their visit, like a set of high-margin HDMI cables.
In 2022, due to high inventory levels, retailers started discounting their regular inventory weeks before Black Friday, with those discounts including higher-quality merchandise.
Shoppers spent their money primarily on smart-home items, audio equipment, electronics, sporting goods, and toys. Gaming platforms, including Xbox Series X and PlayStation 5, also sold well. Shoppers went for drones and Apple MacBooks. In fact, Apple’s MacBook Pro was discounted more steeply than in years past, with discounts of up to $400.
The average consumer discount rate for toys was 31.8%, 23.4% for electronics, and 13.8% for apparel. In 2021, retailers kept their discounts lower due to the amount of merchandise caught up in the ports and other areas of the supply chain. Now that the supply chain woes have eased up, more merchandise is reaching consumers and causing a glut of inventory for retailers.
How these sales impact the bottom line will be something to watch during the next round of earnings reports. Will inventory levels decrease, and if so, by how much? How much will the profit margin and net sales be impacted by offering steeper discounts over a longer period of time?
As more data comes out, we will get a clearer picture of the actual results of Black Friday. For example, while sales increased, could this higher number be attributed to the higher price of everything during our current state of inflation? In years past, a retailer might have needed to sell three televisions to earn $2,000 in revenue, but this year might have only needed to sell two units to reach this same sales level.
Expectations for the remainder of the holiday season
It’s still early days for the 2022 holiday season, and it remains to be seen if consumers will keep shopping or slow down their purchases for the remainder of the weeks leading up to Christmas. The good news for retailers is that early results for Cyber Monday look just as encouraging, with consumers spending $12.8 million every minute from 8 p.m. to 9 p.m. Pacific Time.
Consumers can only absorb so much when buying big-ticket items. While consumers take advantage of Black Friday discounts for electronics, they’re most likely replacing older items that have worn down or upgrading existing ones instead of adding new ones to the household. Retailers may have to discount excess inventory further during clearance sales or consider ways to dispose of what doesn’t get sold and take a loss.
There is an old adage of setting expectations low so that when you surpass them, it looks more impressive. There is a similar, and perhaps opposite adage in retail, mark it up so you can mark it down.
Many retailers were warning of weak holiday sales only to have Black Friday sales surpass close to all expectations. It will be vital to pay attention to how traffic and sales continue in the weeks leading up to year-end to see if this was a one-time event or if consumers are pushing forward with their spending, even while inflation and interest rates are high.
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