Early Spending Sets the Stage, But What About Black Friday?

Boston Consulting Group talks to WWD about its holiday retail forecast and shares insights on consumer sentiments related to holiday spend.

Despite the continued uncertainty from the U.S. consumer, experts from Boston Consulting Group say retailers can take a breath and embrace cautious optimism for the holiday shopping season.

Accounting for the wide range of factors from the geopolitical landscape to the postpandemic recession, BCG's holiday retail forecast says what was largely expected to be a “hard landing” in the U.S. has materialized as more of a “soft landing.” Consumers certainly feel the pressures of inflation and economic recovery and are reporting cutting back on areas including food delivery and dining out, among other activities, but when it comes to the holidays are feeling an optimistic pull at their wallets.

This soft landing for the economy is forecasted to see three out of four consumers spending the same or more compared to 2022. Based on BCG's data consumers also have a higher willingness to spend across all categories compared to last year. This is especially true for younger consumers with 38 percent of Gen Z and 36 percent of Millennials reporting plans to spend more this year on holiday shopping, compared to just 20 percent of Baby Boomers.

Importantly as retailers consider younger consumers' intention to spend more on holiday shopping, Nate Shenck, managing director and senior partner at Boston Consulting Group, said the findings are significant contributing factors. First, tighter labor markets have pulled teenagers and younger adults into the labor force which has given them the means to spend and, second, there may be a general willingness from younger consumers to splurge around the holidays despite the consequences.

Notably, BCG's consumer surveys found that personalization is key for both Millennials and Gen Z consumers who are the most open to being influenced online with personalized recommendations and loyalty programs. The authors of the report agreed that this makes apps and personalized outreach critical for the holiday season.

Also significant this year is the pull forward on holiday deals and sales and what that can mean for retailers' potential results.

“We're all seeing that sales have already started shopping and starting earlier,” Shenck said. “Many of the major brands have already pushed promos out for the holiday shopping season and while Black Friday is still an anchor in everybody's mind on the calendar, it is not as if that's the make or break as it was a decade or so ago.”

Although Black Friday holds a strong recognition and discussion for consumers and retailers alike, both in the U.S. and globally, consumers are shopping earlier online. Data in BCG's report shows that 60 percent of holiday purchases are expected to be completed by Black Friday/ Cyber Monday. And with that, retailers are looking for repeat traffic, meaning a need to win the customer earlier. To do this, retailers need to stay flexible, said Shenck, who also points to some of the benefits of early shoppers.

“The best retailers will develop as they become used to a protracted holiday selling cycle, which is getting some early reads from consumers in October and maybe even the September time frame,” Shenck said. “And that is going to influence the way that they promote as we get closer to the holidays because they are not only trying to capture the consumers' wallets but do that in a way that is a good value for them, as a retailer, and gain real data about consumer attitudes for this holiday season.”

To better understand sentiments around Black Friday specifically, BCG conducted a second consumer survey. Within the report, BCG's team notes that consumer sentiment overall remains muted, again finding that inflation, recession and wars are on the minds of consumers. In light of the cost-ofliving crisis, U.S. consumers have responded to inflation in ways that have altered buying habits. BCG puts these consumer behaviors into three categories: trading down, buying less and increasing price focus.

“November sales events are blurring into a whole season of bargain hunting,” said Julia Hohmann-Altmeier, an associate director in BCG's marketing and sales practice and a coauthor of the study. “And this year, consumers are ready and willing to shop around to get the best value for their dollar. Retailers need relevant discounts and targeted ads based on product interests and key moments if they're going to convert shoppers during what is sure to be a highly competitive shopping season.”

As consumers trade down, 44 percent say they will buy more at discounters or value retailers, 34 percent will choose more affordable brands and 29 percent will buy more private labels. For those buying less, 53 percent will cut back on nonessential purchases, 52 percent will go out less to save money and 19 percent will buy fewer items that are higher quality. Increased pricefocused consumers will check prices more often (51 percent) and buy more based on deals or promotions (41 percent).

With an ever-present deal-seeking mentality, BCG predicts the average spend around November sales events to be about $460 (a 3 percent increase compared to 2022).

Overall, Black Friday remains strong, even growing in popularity, as an omnipresent known part of the shopping calendar. The company's report reveals 97 percent are aware of Black Friday with nearly 80 percent of consumers planning to shop at Black Friday events. In comparison, Cyber Monday had a 94 percent awareness and similar intention to shop. Singles' Day had a recognition of only 17 percent of consumers.

Consumers report they are looking for deals early, but 85 percent aren't sure about the exact product or brand to buy — an opportunity for brands and retailers to influence buying decisions.

This can be done through countdown ads, personalized offers or recommendations, wish lists or recontacting loyalty members and last-time buyers. Omnichannel remains important, with BCG's executives noting that retailers must optimize end-toend omnichannel journeys to solve friction points to increase satisfaction.

As they look for deals to bring financial relief all the time, BCG's report says that “retailers need relevant and wellcommunicated discounts.” More than 60 percent of consumers said they favor clear “discounts on everything” over flash sales or bundle deals, meanwhile, 58 percent of consumers say they like steep discounts even if they are only on selected items. About 30 percent is the minimum expected discount for a “good Black Friday deal” across all categories.

“Black Friday is a highly anticipated part of the annual shopping calendar. As consumers feel pressure on their personal finances this year, they are more dealfocused than ever,” said Jessica Distler, a BCG managing director and partner and coauthor of the study. “The challenge for retailers will be to stand out among the noise.”