Black Friday returns – but consumers’ spending habits have not

PLANO, Texas – Black Friday sales are in full swing, with retailers trying to entice inflation-weary shoppers to splurge on sneakers, TVs and smartphones – both for themselves and their loved ones.

Though the day after Thanksgiving has long been viewed as the start of the holiday shopping season, Black Friday is more of a state of mind now that its namesake promotions stretch across the holiday week, even earlier. Still, it stands to be a big day for deal-hungry consumers even as the “barbell effect” widens the divide between what higher- and lower-earning Americans can spend, said Adam Davis, managing director of the retail division at Wells Fargo Capital Finance.

“Black Friday itself is becoming diluted because it’s expanded so much,” said John Mercer, who oversees global and data-driven research at Coresight. But retailers hope the shorter window between Thanksgiving and Christmas this year could create some urgency to spend.

At midmorning, a Walmart parking lot here was starting to fill up, though it was more typical of a busy weekend. Inside, a handful of shoppers skimmed the electronics aisles, with a few walking away with a flat screen TV or sound bars in their baskets. Others leisurely sifted through bins of holiday socks and fleece pants.

Lauren White, 29, was here to buy for the Salvation Army Angel Tree program, which provides gifts for children in need, and had filled her cart with some toys and clothes. Though she normally doesn’t do her Black Friday shopping at Walmart, she said, she wound up also browsing for herself, having held off on some of the more expensive items on her holiday list until she could score the best deal.

“If we know we’re going to buy something, we might as well wait to get something cheaper,” she said.

At the Super Target across the street, shoppers are being greeted by Taylor Swift songs playing over the loud speaker and a display of exclusive items. Company executives are banking on merchandise tied to the pop superstar to be a draw on Black Friday and, so far, vinyls of her latest album, The Tortured Poets Department, are hot sellers. The Plano store was sold out and, according to news reports, shoppers in some cities queued outside stores to secure an album.

Charlotte Resneder, a 20-year-old drama student in Oklahoma City, was doing some Christmas shopping for her 13- and 14-year-old brothers. In town for the holiday, she was working down her gift list and hoped Target might have Funko POP! she had in mind for her brother because she hadn’t had much luck finding the vinyl figurine elsewhere. She said the store felt “more ran through” than usual.

“You can tell that people have been in, like the clothing section looks crazy,” she said.

The National Retail Federation projects that holiday spending will climb 2.5 to 3.5% – to between $979.5 billion and $989 billion. That’s slower than the 3.8% growth recorded last year but in line with pre-pandemic levels.

Though consumer spending has remained resilient in the face of higher wages and a strong job market, Americans are increasingly price-sensitive. That’s partly because they remember what groceries, clothing and eating out cost them before the pandemic, Mercer said. Combined with higher interest rates and record-high credit card debt, they simply have more incentive to be choosy, shop earlier, compare prices and tradedown when the price is right.

Still, there’s a growing gulf between upper- and lower-income consumers. Chad Lusk, a managing director of the consumer and retail group at the consulting firm Alvarez & Marsal, said households making less than $100,000 a year are more likely to pull back on spending and hold out for sales on such essentials as food, cleaning supplies and seasonal apparel.

And though higher earners have more flexibility with their budgets, they’re still holding out for the right price. That’s especially true of nonessentials, such as a Ninja Creami ice cream maker, an Oura Ring or a Dyson Airwrap at the top of many holiday wish lists. According to a Gallup survey conducted in October, 38% of Americans expect to spend $1,000 or more on gifts, while 31% said they will spend $500 or less.

This shift is already playing out among some of the nation’s largest retailers. Target, which for decades has thrived on higher-earning consumers making impulse purchases on home, apparel and sporting goods, has been losing ground to Walmart. Last week, the Minneapolis-based chain slashed its full-year forecast by about 8%, noting that consumers are still feeling stretched.

Meanwhile, Walmart is projecting strong turnout over the holiday season as it draws in more customers from six-figure households. The retailer based in Bentonville, Arkansas, is seeing rising demand for its general merchandise and grocery offerings, Chief Financial Officer John David Rainey said earlier this month during a call with analysts, partly because it has improved quality while holding the line on prices.

Consumers also are gravitating to discounters such as T.J. Maxx and chains like Dick’s Sporting Goods, a sign they don’t want to sacrifice quality and value in the name of price. Analysts note that Target lost cachet because certain discretionary categories fell short for many consumers.

Department stores have similar challenges, according to a recent Moody’s report. They’re facing stiffer competition for apparel from low-priced e-commerce brands such as Shein, which this month has seen an increase in sales, according to spending data from Consumer Edge, which tracks credit card transactions on more than 100 million U.S. cardholders.

There is also competition from small businesses: A Bankrate survey found that 61% of shoppers said these stores offer more unique gifts and better customer service than big box chains and department stores.

Retailers that offer the best discounts and “nondiscretionary essentials” are well-positioned this year, Moody’s said. It’s already reflected in online sales, with data from Adobe Analytics showing consumers are more eager to buy items in practical categories like groceries and cold-weather clothing. They are also picking up new sheets and replacing old furniture.

Gift cards are particularly popular among households making less than $100,000, Lusk said. It’s “a practical choice,” he said, that lets the recipient decide whether to use it for basic needs or modest splurges.

More Americans are doing most or all of their holiday shopping online, with Adobe Analytics forecasting a record $240.8 billion in holiday spending. Sales so far are outpacing expectations; consumers spent $77.3 billion online from Nov. 1 to Nov. 24 on Bluetooth speakers, pickleball paddles, gaming consoles, skincare sets and other offerings. That’s 9.6% higher than the same period last year and trending above the full-season forecast of 8.4%.

Data shows that consumers are “willing to splurge on more expensive items in categories from electronics to appliances, partly in response to persistent discounts,” Vivek Pandya, lead analyst at Adobe Digital Insights, wrote in the latest sales report.

Other hot sellers online include smartwatches, “Call of Duty: Black Ops 6,” Bluey toys, LEGO Harry Potter games and Tonies Audio Play figurines.

The upcoming Cyber Monday will bookend the holiday deals frenzy. Bankrate expects spending will outpace that of Black Friday.