In the United States, the financial well-being of households remains healthy, as evidenced by the fact that local shoppers continue to spend money during the holiday season, searching for the most profitable goods deals on virtual trading platforms, making purchases of a significant cumulative amount of apparel, electronics, and jewelry.
The mentioned buyers pay attention to the price, which means that saving is not a secondary issue for them. But at the same time, the volume of purchases is significant, which indicates the availability of funds and definitely does not signal a certain critical downturn in purchasing power.
In the United States, during the holiday shopping period from November 1 to December 24, spending showed an increase of 3.8% year-on-year. The relevant information is contained in the Mastercard SpendingPulse report. It is worth noting that this company initially predicted that the mentioned indicator would grow by 3.2%.
In 2023, in the United States, spending during the holiday shopping period increased by 3.1% compared to reading for the same period in 2022.
Steve Sadove, senior adviser to Mastercard and former Saks chief executive officer and chairman, stated that the US consumer is currently healthy. Also in this context, he separately noted that the unemployment rate in the country is low, and wages are showing growth. According to Steve Sadove, US consumers’ personal finances are reflected in the fact that they are shopping.
It is worth noting that ahead of the holiday season in the United States, many retailers have characterized their consumers as selective, conservative, and cautious. Also, in this context, such a feature of consumer behavior as making purchases based on the priority of primary needs was mentioned separately. Against this background, many retailers, in an effort to gain customers, have stepped up price-cutting measures and offered promotions. This was reported in the current month by Bernstein analysts.
Walmart has announced plans to continue lowering prices through rollbacks. Its competitor Target to increase promotional intensity. Abandoning such efforts is highly likely to decrease the engagement of shoppers.
At the same time, Dollar General expects lower profits due to increased promotions in the fourth quarter of the current year. Kroger and Five Below stated that they have decided to cut prices to boost their competitiveness.
Recently, retailers have been increasingly experimenting with integrating generative artificial intelligence into their business space. Most often, within the framework of relevant practice, AI is used as a tool for performing operations related to customer service and product search. Artificial intelligence is also being applied to improve curbside pick-up and delivery services. In this case, retailers strive for a smooth shopping experience.
Steve Sadove stated that the level of promotions remains the same as last year. According to him, spending is stimulated by upgraded TVs and laptops, increasing acceptance and lower prices for lab-grown diamonds, and continued demand for athleisure apparel.
Mastercard data shows that sales in the apparel category increased by 3.6% year-on-year. The upward dynamic was also recorded in the electronics category. In this case, sales increased by 3.7%%. Consumer demand for jewelry rose by 4%.
Separately, it is worth noting that apparel sales on virtual platforms increased by 6.7%. At the same time, the corresponding indicator rose by 0.7% in stores. Shoppers searched for favorable shopping offers on several websites.
Mastercard SpendingPulse measures in-store and online retail sales across all forms of payment. It is worth noting that these data do not take into account car sales figures and are not adjusted for inflation.
Steve Sadove stated that during the holiday season, sales on virtual platforms generally showed growth, the intensity of which was twice as fast as the similar pace in stores. In this case, it was a continuation of the tendency of digital-first shopping outpacing retail. According to Steve Sadove, the mentioned data suggests a shift towards more normalized shopping behavior.
It is also worth noting that this year’s shorter-than-usual holiday season has not been a factor in the downward impact on sales figures. Moreover, this dynamic was not slowed down by such a feature of consumer behavior, which is that many shoppers wait until the last moment for the most favorable offers to buy goods. Steve Sadove stated that the last five days of the holiday season account for 10% of all spending in the corresponding period. He also noted a very big Super Saturday and Sunday. In this case, it means the weekend before Christmas, when last-minute shoppers rush to buy gifts.
Also, the media, citing Adobe Analytics data, stated that consumers are expected to spend almost $241 billion on purchases on e-commerce platforms during the holiday season. At the same time, according to some experts, this forecast indicator is not positive or, at least, unambiguously positive for retailers. In this case, they are referring to the fact that simplifying the mechanism for returning purchased items for consumers means a multibillion-dollar problem for retailers.
Over the past few years, online purchases have demonstrated higher rates of return compared to brick-and-mortar purchases. This is a logical tendency, since when shopping on virtual platforms, customers cannot see or try on an item.
In the United States, consumers returned 17.3% of their online purchases last year. For in-store items, this figure was 10%. The relevant information was published by the National Retail Federation. Returns made up $743 billion, or 14.5% of the $5.13 trillion in retail sales last year. In 2012, this figure was 8.8%.
For retailers with margins eroded due to the so-called arms race in free shipping, the need to foot the bill for processing unwanted, used, or damaged goods exacerbates their difficult situation. It is also worth noting that a returned item may no longer be sellable. In this case, the item ends up in the discount bin, having a negative impact on profits. Returns become unpredictable and are hard to account for on a company’s balance sheet. This issue is particularly relevant for apparel. In most cases, customers order items in different colors and sizes before returning the ones they don’t like. For some online clothing sellers, returns averaged about 40% of sales.
The National Retail Federation expects this year’s holiday season return rate to be 17% higher than usual. It is worth noting that January is traditionally the period of the most returns. It is also important that refunds are a kind of organic part of retailers’ relationship with customers. The seller’s moves in the context of this aspect of activity largely determine the quality of the consumer experience.
Also, data from special industry studies indicate that retailers who expect an increase in revenue are more likely to offer online returns than those who do not predict changes in earnings.
As we have reported earlier, Canadian Holiday Sales to Increase 2.2% This Season.
