As retailers analyze the results of the latest Black Friday sales, the overall picture shows a modest but positive outcome. This year, consumers demonstrated a readiness to shop, yet it was evident that substantial discounts were necessary to drive purchases. In-store and online sales rose 3 percent year over year on Black Friday, according to data from Mastercard. On the digital front, consumers spent an estimated $22 billion, marking an 8 percent increase from last year.
Several factors contributed to this healthy holiday season kickoff. One significant element was the shortened holiday shopping period, which is down to 26 days between Black Friday and Christmas, compared to 31 days in 2023. In response, brands began promoting their Black Friday deals as early as October 1, creating a sense of urgency among consumers to make purchases before products sold out.
However, this year’s sales event also highlighted growing consumer resistance to rising prices in fashion. As prices creep up, consumers are increasingly looking for discounts and are not hesitant to express dissatisfaction with minimal markdowns. The result? A marketplace where deeper discounts became essential for driving sales.
Retailers found themselves in a tricky situation, trying to balance their discount strategies. Some chose to maintain discounts from previous years while others increased their markdowns significantly, often starting sales earlier in the season. This lack of a cohesive strategy led to mixed messages to consumers, evidenced through social media complaints about perceived stinginess with discounts, where markdowns of 10 to 20 percent fell short of shopper expectations.
Brands that performed well throughout the year seemed more inclined to protect their profit margins than to offer deep discounts. For instance, athletic footwear maker Hoka raised the threshold for its Black Friday gift promotion from $175 to $250. In striking contrast, brands struggling with disappointing sales were compelled to offer steep discounts. The Crocs-owned brand HeyDude, for example, offered 60 percent off many items, alongside an additional 25 percent off already discounted products to encourage sales.
The shifts in shopping behavior are particularly evident among Gen-Z. There has been a resurgence in in-store shopping over the last two years, although e-commerce remains strong. Mastercard SpendingPulse estimated a 15 percent year-over-year jump in online sales, while in-store transactions grew less than 1 percent. This evolution in consumer habits signals a transformation where young shoppers prefer to compare deals online, opting to bypass long lines and crowded stores.
As consumers continue to seek lower prices, the analysis of discount strategies this Black Friday may serve as a precursor for what is to come in future holidays. The anticipated rise in tariffs on imported goods, projected for January after the presidential transition, threatens to exacerbate price increases. How brands adjust their pricing and promotional strategies in this new climate will be a critical survival factor.
The mixture of early promotions, changing consumer expectations, and the variability in discounting strategy presents a complex landscape for retailers. While this year has shown healthy initial sales growth, the warnings signs cannot be ignored. Retailers may need to brace for tougher negotiations with consumers who have become accustomed to lower prices in a more competitive market.
In essence, the transition from Black Friday into the holiday season this year confirms that while the kickoff was solid, the road ahead for retailers is fraught with challenges. Navigating consumer expectations for ever-lower prices will be crucial as they forge their strategies for the future.
