Online holiday spending expected to be weak after months of early discounting

A contractor working for cleans a delivery truck in Richmond, California, on Tuesday, Oct. 13, 2020.David Paul Morris | Bloomberg | Getty ImagesAfter months of sales and markdowns from retailers scrambling to offload excess inventory, getting shoppers to click on deals this holiday season won’t be easy.Already, retailers had been struggling to move products after miscalculating what shoppers would want coming out of the pandemic. Soaring inflation has also been squeezing consumers, forcing companies to slash prices further to get them to spend. And to compete for holiday spending, retailers are offering deals earlier and earlier.All those factors are expected to dampen demand for the big holiday sales — even online, where consumers have been doing more their shopping in recent years.”The shape of the holiday season will look different this year, with early discounting in October pulling up spend that would have occurred around Cyber Week,” said Patrick Brown, vice president of growth marketing and insights at Adobe, which uses transaction data from retailers to make annual forecasts for online holiday sales.This year, online sales on Black Friday are expected to increase just 1% from a year ago, while Cyber Monday revenue is expected to grow 5.1%, according to Adobe. Overall, online spending throughout the holiday season is forecast to grow 2.5%, the smallest growth since Adobe started tracking the figure in 2015. Adobe even warned of a potential decline, projecting a range for sales to be between down 2% and up 5%.Bleak FridayLast year’s holiday shopping season got off to an early start as well. But that was because shoppers were scrambling to secure gifts as supply chain bottlenecks led to shortages on a wide range of products.Now, retailers are the ones offering deals early, either to get rid of inventory or to compete for business. The ongoing discounting means spending may be spread out more this holiday season.”This is first year since e-commerce came into its own, where things are a bit more unpredictable,” said Taylor Schreiner, senior director of Adobe Digital Insights.Amazon is holding its second Prime Day of the year Tuesday, which marks the first time the online retail giant has had two of the discount days in a year. Major retailers such as Target and Walmart are getting started early too.Walmart’s online event, Rollbacks & More, runs from Monday to Thursday with markdowns on electronics, toys, apparel and more. Target’s Deal Days ran last week, and the retailer is stretching out its price match guarantee from the start of that event through Christmas Eve.The early deals could mean people are already stocked up on gifts and decorations by the time the holiday shopping season traditionally kicks off after Thanksgiving. Only 20% of consumers to shop on Black Friday, according to accounting firm PricewaterhouseCoopers. That’s down from 36% in 2019 and 2020; the question was not asked last year.And in a break from past years, more stores may stay closed on Thanksgiving day this year. Walmart and Target have announced their stores will be shuttered for the holiday.Smaller haulsThe inflation that’s hitting supermarket shelves isn’t as stark online, according to Adobe. That’s largely because fuel and grocery sales, which have seen some of the biggest price hikes, are usually purchased in person.Still, inflation is affecting online buying habits. On Amazon’s Prime Day in July, consumers opted more for necessities such as dishwasher pods and diapers, and away from splurge items such as Instant Pots and Roombas.The pullback in spending is likely to carry over into the holidays. A survey from KPMG found that 85% of holiday shoppers are concerned about inflation, and that 34% will opt for cheaper gift categories.”Consumers will be looking for promotions this holiday season, and retailers should be looking to respond by having desirable gifts for the budget conscious consumer,” said Matt Kramer, head of KPMG’s consumer and retail sector.Adobe expects retailers to try to entice gift purchases this season with deep discounts, especially in technology and toys, where it forecasts prices will be marked down over 20%. But even if those discounts lure shoppers, the price cuts will curb companies’ profits.

Show More

Related Articles