As the holiday shopping season heats up, recent data reveals a tough environment for many retailers. Credit card transactions analyzed by Earnest indicate a decline in consumer spending at major U.S. retailers. In the first half of November, spending was down 1.4% compared to the previous year, marking the first downturn recorded since 2017. This data offers crucial insights as retailers gear up for Black Friday, a day historically known for high consumer spending.
The decline in spending can be attributed to several factors. Retailers appear to be strategically holding back their most attractive promotions for later in the season, hoping to maximize impact. Additionally, Amazon’s October Prime Day may have shifted some holiday shopping earlier, drawing potential customers away from Black Friday. However, the most significant impact comes from the rapid rise of platforms like Shein, Temu, and TikTok Shop. These e-commerce sites have captured significant market share, drawing consumers with attractive pricing and trendy offerings.
In the first half of November, Shein’s sales grew by 16%, while Temu’s sales increased by an impressive 18%. Even TikTok Shop, a newcomer to the e-commerce scene, saw its sales more than triple compared to last year. In contrast, Amazon’s sales remained flat, likely influenced by its earlier promotional efforts. According to Earnest, generalized e-commerce platforms now account for 21% of holiday sales, doubling their share since 2016. This shift poses serious challenges for traditional retailers already grappling with sluggish spending.
The stakes for Black Friday are high, with U.S. shoppers spending approximately $9.8 billion on the holiday last year, as reported by Adobe Analytics. To entice customers, retailers are under pressure to offer steep discounts, yet matching the low prices of competitors like Temu poses significant risks. Many brands risk deepening profit losses if they fall behind in the pricing war, as consumers continue to scrutinize prices in a budget-conscious economy that lasts well into the new year.
Nevertheless, some traditional brands are managing to stand firm during the holiday season. Abercrombie & Fitch, for instance, was one of only two full-price fashion retailers to report positive sales growth in November, indicating that it remains in tune with young consumers’ preferences. Victoria’s Secret also saw substantial gains, showcasing the effectiveness of its renewed marketing strategies centered around its popular October fashion show.
Another compelling case is Gap, which reported a 6% drop in sales in the first half of November. Conversely, the company indicated optimism, pointing to strong third-quarter results and a strategic approach for the upcoming holiday season. Gap’s focus on innovative marketing and merchandising campaigns that highlight new colors and styles, as well as a new fabric blend known as CashSoft—designed to mimic the luxurious feel of cashmere—illustrate its commitment to quality and differentiation.
Gap’s CashSoft cable-knit sweaters, priced under $50, align well with consumers who may be enticed by Temu’s budget-friendly alternatives. While the thrill of shopping at Temu remains appealing for some, there is a sizable market segment that prioritizes quality and reliability over a potentially inferior product.
In conclusion, Black Friday is set for a tumultuous showdown, pitting traditional retailers against digitally-savvy competitors. As brands navigate this pressing landscape, their ability to adapt and innovate will determine whether they can reclaim lost ground in a market increasingly dominated by the likes of Shein and Temu.
