Record-High Discounts Are Expected During the Holidays Despite Inventory Gluts, Softening Consumer Spending

Shoppers spent $204.5 billion online during the 2021 holiday season, a growth of 8.6 percent from the previous year, after consumers were reluctant to shop at physical retail stores due to the pandemic.

Almost half of the projected online customer spending is expected to come from electronics, at $49.8 billion, up 2.9 percent.

This was followed by apparel, which is projected to hit $40.7 billion in online purchases, while groceries are set to reach $13.3 billion in sales online.

However, the holiday season is expected to influenced by an “uncertain economic environment” due to higher prices, volatile markets, and rising borrowing costs.

Inflation rose 8.3 percent in August from the same time in 2021 and 0.1 percent from July, according to the Department of Labor last month.

Food, housing, and gas were up 11.4 percent, 6.2 percent, and 25.6 percent, respectively, from a year ago.

The Federal Reserve has been aggressively raising interest rates this year, and has made three consecutive hikes of 75 basis points in its efforts to combat inflation.

“Consumers are battling inflationary pressures, but getting the best discounts they’ve seen in years because retailers have quite a bit of oversupply of inventory. They will definitely be spending earlier and spreading their spend across the season because discounts are spreading across the season,” Vivek Pandya, lead analyst at Adobe, told Women’s Wear Daily.

Holiday Season Sales Expected to Decline This Year

Many retailers are still dealing with a glut in their inventory, which has hurt profit margins, as they attempt to sell off the excess stock.

“The supply chain has eased, and the demand has slowed for goods, so retailers are trying to offload inventory and drive up growth by bringing prices down, which means cutting into profit margins but also opportunities to win consumers and drive loyalty for the long term.”

“Cyber Week,” which lasts from Thanksgiving to “Cyber Monday,” will likely haul in a total of $34.8 billion, an increase of 2.8 percent from last year, said Adobe.

The largest online discounts are expected to reach consumers between Thanksgiving and Cyber Monday, as retailers “contend with oversupply and a softening consumer-spending environment.”

Last year, Cyber Week made up 16.6 percent of sales for the season, but it is expected to fall to 16.3 percent of the total holiday season’s online spending in 2022.

Cyber Monday, the year’s biggest online shopping day, is expected to rake in a record of $11.2 billion in spending, which is an increase of 5.1 percent from last year, according to Adobe.

“Black Friday” online sales are projected to grow only by 1 percent this year, at $9 billion, but Thanksgiving sales are predicted to fall to $5.1 billion, a decline of 1 percent from 2021.

Amazon also announced that it will hold a second “Prime Day” from Oct. 11–12, which Adobe said will encourage consumers to hopefully spend earlier this year before the holidays.

Target and Walmart both said that they will also hold early holiday sales events in October.

“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.

“Even though we expect to see single-digit growth online this season, it is notable that consumers have already spent over $590 billion online this year at 8.9 percent growth, highlighting the resiliency of e-commerce demand.”

Discounts are expected to reach 20 percent from the day after Cyber Monday through the remainder of the year.

Computers, electronics, and toys will have the most significant discounts, reported Adobe.

Adobe believes that the traditional holiday shopping day sales are losing their effect, as online shopping becomes a common daily activity and consumers receive discounts on a regular basis throughout the season.

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