Cyber Week Holiday Sales Smash Records
There was a lot of uncertainty heading into this year’s November-December retail holiday shopping season. On one hand, the National Retail Federation expects American consumers to spend a record-high $962 billion on gifts, decorations and other seasonal items during the 61-day shopping extravaganza, up 3.5% from last year.
On the other hand, retailers are concerned about the durability of consumers. For nearly three years, Americans have struggled with high inflation. Interest rates are at a 40-year high. Savings accounts have been steadily dwindling. Total household debt stands at a record-high $17.3 trillion. Total household credit card debt is at a record-high $1.08 trillion. With all these obstacles, can consumers deliver the robust holiday shopping season the retail industry is expecting?
The retail industry got a boost of optimism when Adobe Analytics released online shopping data for Cyber Week, the five shopping days from Thanksgiving through Cyber Monday. Cyber Week encourages consumers to shop online. Many online retailers typically offer steep discounts and promotions to entice holiday shoppers. Some of the larger discounts are seen on Cyber Monday.
According to Adobe Analytics, consumers spent a record-high $38 billion in online sales during Cyber Week, up 7.8% from 2022. This was fueled by a record-setting $5.6 billion of online sales on Thanksgiving, 5.5% higher than last year. Online sales on Black Friday reached a record $9.8 billion (+7.5% from 2022) while online sales on the weekend days of Saturday and Sunday reached a record $10.3 billion (+7.7% from 2022). On Cyber Monday, online shoppers spent a record $12.4 billion, up 9.6% from last year. In fact, during the peak hour of 9:00PM to 10:00PM on Monday, Adobe Analytics estimates consumers spent a staggering $15.7 million every minute.
One of the major trends during Cyber Week was the continued growth of buy now, pay later (BNPL). BNPL is a short-term financing option that allows consumers to make point-of-sale installment loans for purchases. For example, payment provider Affirm partners with major retailers such as Amazon, Walmart and Target to provide consumers a BNPL option. Klarna, PayPal, Apple Pay Later and Afterpay are other popular BNPL providers. On Cyber Monday, BNPL drove $940 million (7.6%) of all online sales, a 42.5% increase from 2022. From Nov. 1 through Nov. 27, online BNPL sales totaled a record $8.3 billion, up 17% from last year.
Among other trends, Adobe Analytics cites that 51.8% of all online sales during Cyber Week came from shoppers using their smartphones, up from last year’s pace of 49.9%. Retailers this holiday season are also offering record discounts to inflation-weary shoppers. Discounts on electronics peaked at 31% off the listed price compared to 25% in 2022. Discounts on apparel peaked at 23%, compared to 18% last year, while discounts on furniture peaked at 21%, compared to just 8% in 2022.
Despite the record-setting $38 billion of online sales during Cyber Week, it’s too early to make any conclusions on the success of this year’s holiday shopping season. The five-day Cyber Week is just a snapshot into the broader 61-day holiday season. Moreover, the latest data from Adobe Analytics only includes online sales. It doesn’t include retail sales from physical brick-and-mortar stores. In fact, only $1 out of every $5 spent this holiday season will be via online shopping.
Also, the bulk of online sales procured during Cyber Week required significant discounts to lure holiday shoppers. For retailers, there’s not a lot of profit to be made when the majority of your holiday sales come from heavily discounted goods and services.
Whether the recent flurry in shopping continues post-Cyber Week will be closely monitored. As we’ve seen in previous holiday seasons, consumer spending can quickly plummet at the start of December as retailers scale back their hefty discounts. But as retailers cross the half-way point of the 2023 holiday shopping season, last week’s Cyber Week sales data indicates consumers just might deliver a record-setting performance after all.
Mark M. Grywacheski, Investment Advisor
Quad Cities Investment Group is a Registered Investment Adviser.
This material is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Quad Cities Investment Group and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Quad Cities Investment Group unless a client service agreement is in place.
