As the cost of living in the U.S. rises, consumers are anticipated to comb through Black Friday deals for steep discounts, putting strain on retailers and the economy.
U.S. consumers, grappling with inflation, are expected to seek larger bargains this Black Friday, the Financial Times reported. In response, retailers are prepping for deeper discounts to entice these budget-conscious shoppers.
The National Retail Federation predicts a record-breaking 182 million people will shop from Thanksgiving through Cyber Monday, marking a significant uptick from the previous year. Notwithstanding, even as average spending is anticipated to climb by 13%, S&P Global Market Intelligence projects the total sales growth for the holiday season to be a mere 3.3%.
Despite a minor dip in inflation in October, consumers continue to feel financial strain, fostering a sense of caution among retailers. Companies like Home Depot Inc. HD and Lowe’s Companies Inc. LOW have reported a decrease in expenditure on major home improvement projects.
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A survey by McKinsey reveals that approximately 80% of consumers plan to “trade down” for their holiday shopping, choosing less expensive alternatives or eschewing purchases entirely. Consequently, retailers are offering more substantial discounts, particularly in certain categories, as per an evaluation by Adobe Analytics.
Despite this ongoing pressure, some retailers such as Target Corporation TGT and Walmart Inc. WMT don’t see the need for significant price reductions, thanks to improved inventory conditions.
The report also underscored a rise in the use of ‘buy now, pay later’ options by consumers, dubbing 2023 a “breakout year” for these short-term financing schemes.
In light of the cost-sensitive environment, experts recommend consumers conduct thorough research and planning for this shopping season.
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