During this year's "Black Friday" shopping festival, American consumers and retailers seem to be going crazy... On one side, in order to attract customers, merchants can only rely on "jumping prices" and "breaking prices" to compete for price reductions; on the other side, consumers who have long suffered from high inflation and have always tightened their wallets are finally looking forward to the "golden window" of holiday season discounts, waiting for greater product discounts, and thus starting to spend lavishly. Ever since, people have also seen an unprecedented "Black Friday" online sales peak...

According to data released by Adobe Analytics last Saturday, U.S. shoppers spent a record $9.8 billion online on Black Friday alone, a significant increase of 7.5% from last year. E-commerce platform Shopify also reported record global sales over the weekend - the platform's Black Friday sales totaled more than $4 billion this year, 22% higher than last year.


"Consumption downgrade" under the hot "Black Friday"

With inflation continuing and government stimulus funds almost exhausted, choosing cheaper goods seems to be becoming the primary demand of American consumers.

A study by global information giant McKinsey found that nearly 80% of consumers hope to "downgrade their consumption" during this year's holiday shopping, replacing the goods they plan to buy with cheaper alternatives, or else giving up buying them altogether.

Behind the latest hot "Black Friday" sales data, it is actually the result of merchants being forced to cut prices significantly and consumers being satisfied - consumers would rather suppress their consumption needs in the past few weeks or even months, just waiting for the window of the "Black Friday" holiday promotion season.

According to the National Retail Federation, more than 182 million people are expected to shop during the 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 on Black Friday were electronic products such as smart watches and TVs, as well as toys and games. The agency analyst Vivek Pandya said that whileThese best-selling products are directly related to the products with the biggest discounts.


According to Adobe statistics, the five most popular categories of products on Black Friday are: KidKraft toy sets, MiniBrands series toys, TVs, smart watches and headphones.

According to data from Adobe Analytics, online product discounts during this year's "Black Friday" are greater than a year ago, especially toys and clothing.Among them, the average discount on toys reached 28%, compared with 22% in the same period last year; the average discount on electronic products was 27%, which was basically the same as the same period last year. When it comes to apparel, shoppers saw an average of 24% off, up from 19% last year.


Rob Garf, vice president and general manager of Salesforce's retail business, pointed out that strong online sales on Black Friday show that shoppers are investing more time and energy in selecting the lowest-cost and most cost-effective products., the company tracks e-commerce service data flowing through its commerce cloud.

"Although retailers started their holiday sales earlier this year, there weren't many deals initially," Garf noted. "However, consumers were patient and diligent, and they played a waiting game. And in the end, they won."

Gregory Daco, chief economist at Ernst & Young, said in a report that although inflation cooled in October, the perception of "cost fatigue" still exists, which suppressed consumers' desire to spend earlier. Cost fatigue is the perception among consumers that everything costs more than before the pandemic.

Merchants have fallen into "involution" in the discount wave

From a merchant perspective, U.S. retailers have actually been preparing for a challenging holiday season for a long time.Previously released data showed that U.S. retail sales fell 0.1% month-on-month in October, the first decline in nearly seven months.

Many executives said that after two years of consumption spurred by the epidemic, American retailers are now facing more selective consumers. More and more American consumers want to buy when the prices are best, and are more keen to find these deals online rather than offline. All retailers can do is to adapt to this change with greater price cuts during this year's discount season.

Ultimately, people can undoubtedly see that most retailers such as Best Buy and Lowe's are offering deeper discounts than before, while retailers such as Target and beauty retail giant Ulta Beauty have launched flash sales and even provided 24-hour discounts on certain brands and products.

Macy's CEO Jeff Gennette told investors this month that retailers from Macy's to Amazon are launching promotions as early as October and may offer additional discounts closer to Christmas.

The special offers reflect fierce competition among retailers, who face intense pressure to attract U.S. consumers who are tired of still-high inflation on many items.“People are more focused on cost-effectiveness,” said Barbara Kahn, a professor at the Wharton School of the University of Pennsylvania. "People are spending, but their spending has become more conservative."

Neil Saunders, managing director of GlobalData, said, "Shoppers are looking for items they really want and need, rather than simply impulse buying a lot. This is not necessarily a good thing for retailers."

In fact, despite the "full sincerity" of merchants, many consumers are still quite sensitive to prices and are already quite strapped for cash. More and more consumers are choosing the "buy now, pay later" transaction method.Adobe research shows that during Black Friday, approximately $79 million in sales came from consumers who chose the "buy now, pay later" method of payment, an increase of 47% over last year.

Is the U.S. economy really quiet?

Looking back at retail sales in the United States this year, it is not difficult to find that consumers are spending money at a different pace this year than in past years, when consumption was characterized by post-epidemic splurges.

However, retailers targeting the middle and upper classes of the United States have recently experienced the largest decline in sales data in two years. The U.S. economy relies on consumer spending to fend off recession. Generally speaking, wealthy shoppers tend to have a huge influence on consumer spending, not only because they have money to splurge when the economy is strong, but because they are also quicker to cut back on spending when the economy is stressed. But wealthier Americans are spending less in the run-up to this year's Black Friday shopping season, which in itself could be a worrying sign.

Bloomberg has previously created a wealthy index to represent the spending levels of high-income groups, which covers 30 large retailers and brands in 10 categories. Sales performance of retailers and brands in the index has fallen sharply since January and has worsened recently. Sales fell at 70% of companies in the three months from August to October, with the median decline of 14%, the worst performance in two years.

Best Buy CEO Corie Barry recently said: "In the recent macro environment, consumer demand has become more uneven and difficult to predict."

Consumption accounts for more than 70% of the U.S. economy. At present, despite the hot Black Friday sales data, a more worrying risk is whether consumers will take advantage of the price cuts during this promotion season to overdraw their future budgets in advance? Can this kind of consumption enthusiasm be sustained? As the pressure on household spending growth further emerges, the turning point in U.S. GDP growth may still come.

Currently, U.S. personal savings are falling from their pandemic-era highs, and while inflation is slowing, many items are still significantly more expensive than they were a few years ago. Rising interest rates have also pushed up house prices and car prices, forcing consumers to make choices.

At the same time, as excess savings are gradually depleted, Americans are increasingly relying on credit cards for consumption. The New York Fed's report on total household debt levels in the third quarter released earlier found that total credit card debt has reached $1.08 trillion. As the Federal Reserve sharply raises interest rates, borrowers' costs are also increasing significantly: the average annual interest rate on credit cards in the United States has exceeded 20%, which may also become a potential headwind.

It is not difficult to foresee that how the Fed gradually exits its tightening cycle will likely depend on the feedback from a series of business activities and consumer demand.

If the hot numbers of "Black Friday" are a true reflection of the recovery of U.S. consumption, then the Fed will undoubtedly maintain a relatively hawkish tone; but if the hot holiday season is just a flash in the pan, leading to a sharp cooling of future retail data, then people's concerns about whether the prospect of a soft landing can be established will undoubtedly increase.

Of course, Michelle Meyer, chief U.S. economist at Mastercard Economics, is still relatively optimistic.

Meyer said that after experiencing chaotic shopping experiences in recent years, consumers are returning to a more normal shopping rhythm. She said in an interview that this year's sales forecast points to a "return to a more balanced economy," with U.S. unemployment remaining low and consumers still having spending power.