When the holiday shopping season rolled around last year, brands and retailers were already struggling with rising inflation cutting into discretionary spending. This year, inflation is still likely to affect how customers spend, but brands are more prepared to deal with it.
While it’s still early in the shopping season, there are already indications that this holiday season will be a bigger success than last year’s. Early data from Adobe Analytics, released this week, showed that customers in the U.S. spent $76.8 billion on retail in October, an increase of more than $4.3 billion from last year. And total seasonal retail sales this year are already up to $95 billion. According to Adobe, early discounts have lured shoppers, as have buy-now, pay-later options, which have already driven $7.8 billion in spending. That’s an increase of 6% year-over-year.
Vivek Pandaya, lead analyst at Adobe Digital Analytics, said that these numbers indicate a stronger holiday season than the one we saw last year, even despite the ongoing risk factors facing retail.
“We continue to experience a challenging economic picture, where increasing costs for consumers has been seen across rising interest rates, inflation in food prices, resuming student loan repayments and more,” Pandaya said. “Despite the uncertainty in the macro-environment, the data has shown that the consumer remains resilient heading into the big holiday season and is embracing every opportunity to manage their budgets in more efficient ways.”
But this growth comes with a potential downside. The increased revenue this year has been fueled heavily by discounts. Adobe data supports this, showing that the apparel industry began to offer steep discounts at the beginning of October. For example, apparel prices were 9% lower in October than in September. That’s far steeper than last year, when discounts averaged 5%.
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Jackie Stauffer, founder and CEO of The Sprout Collective consultancy, which works with DTC brands including the intimates brand Kindly, said the cyber discount element of holiday shopping has started earlier this year than ever.
“It’s been a discount-heavy year, in general, and it’s especially heavy this holiday season,” Stauffer said. “Shoppers are still shopping, but they’re more price-sensitive than ever. I have brands expecting to see 20-30% more sales this year than last year, so the demand is not soft, but it’s discounts that are encouraging spending.”
For that reason, Stauffer said DTC brands are in the best position to handle a more discount-heavy season since they have more control of their discounts than primarily wholesale brands. The main risk brands face, she said, is that the extended holiday sales period risks robbing the season of its urgency.
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“It’s a hard balance,” Stauffer said. “The strategy we use with brands is to spread out different kinds of promotions. Yes, you’ll have promotions for three months, but you only have a 20% discount for a few weeks and then one day of a 30% discount. Then it’s just a matter of using last-chance messaging to encourage sales.”
