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Black Friday Data Comes With Covid Caveats

The coronavirus has affected everything, and Black Friday sales are no different.

This year was the first time in years that many retailers were closed for Thanksgiving. In the past, they would begin to reopen around 5:00 or 6:00 p.m. to give shoppers an early start to Black Friday. Not surprisingly this year, with stores closed and social distancing in place, online sales saw a surge on Thanksgiving.

According to Adobe Analytics, Thursday saw a 21.5 percent year-over-year uptick in spending to $5.1 billion, up from online sales of $4.2 billion in 2019. The data set also indicated that close to half, at 46.5 percent, of all online sales came from smartphones. It also found that retailers that offer curbside pickup benefited from a 31 percent higher conversion rate on traffic to their sites. “We expected this to become even more pronounced as we approach Christmas, and free and less expensive shipping options continue to dwindle,” Adobe said.

The data analytics firm expects Black Friday’s online sales to reach between 20 to 42 percent year-over-year growth, reaching $8.9 to $10.6 billion in the U.S. Adobe expects the full holiday season to see online spending growth at up 33 percent to $189 billion from 2019 levels. That’s compares with Salesforce’s projections of $11.9 billion in the U.S. and $56.5 billion globally. In the last few years, the idea of Black Friday sales has picked up considerable steam overseas.

The laggard this year will be brick-and-mortar. Again, no surprise there given the ongoing coronavirus pandemic.

“Black Friday’s been losing it’s importance and this year that will accelerate,” Charlie O’Shea, senior retail analyst at credit ratings firm Moody’s Investors Service, said.

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The credit analyst noted that one problem this year is the uncertainty in not knowing how consumers will respond or even what they will buy when do they decide to pull the trigger.

“Retailers don’t know what they don’t know. Strategically, this environment is the most difficult they’ve faced. You just throw out the rule book, or playbook, because anything you know from before, such as how many widgets got sold on any given day, no longer is relevant to this shopping environment,” O’Shea said.

He also doesn’t know if the inventory levels retailers have currently will hold out for the remainder of the season. “We don’t have data replicating this history. The retailers are flying blind. They are comfortable with their inventory position now, but no one knows what that means tomorrow or the week after,” he said.

Some retailers began Thanksgiving week with a set discount, only to raise it higher for Black Friday. One example is footwear brand Clarks USA, which was offering 40 percent off at the start of Thanksgiving Week, and raised the percentage off to 50 percent for Black Friday. That raises the question of what do they do for Cyber Monday?

According to O’Shea, generally, if discounting stays within the 40 to 5o percent range, it could mean retailers made the right guesses on their promotional events, but a significant discount higher than 60 percent could mean instead that something’s off, like possibly that they guessed wrong on the fashion product mix.

What may end up being key to this year’s holiday season may very well be what retailers do to guarantee delivery of online orders in time for in-season holiday gift giving. O’Shea said he’s personally experienced a hiccup when an order that was placed on Monday and was supposed to be delivered on Wednesday hasn’t even been shipped yet.

“There’s a lot of fear out there shopping anywhere at a brick-and-mortar unless it’s curbside delivery,” the credit analyst said, adding that consumers won’t be happy when promises of one-day or two-day deliveries get unmet.

Natalie Kotlyar, BDO partner and retail and consumer products practice leader, said that anyone who shifted to online shopping due to necessity after the Covid-19 outbreak in March and now finds that packages are taking longer to get delivered won’t be happy with the change.

“The shipping experience is the only thing we have right now,” she said, explaining that no one knows what the new normal will be post-Covid-19 or even when we will get there. And with travel and entertainment more in line with sheltering in place, the only experience left for consumers is centered on the delivery, such as “whether retailers can meet their expectations for having purchases arrive in a nice condition, properly wrapped and on-time delivery.”

As for Black Friday sales at the malls, “it’s definitely significantly slower than in prior years. The malls are down in terms of volume and traffic. Once you go into the department stores, [you’ll see that they’re] hit hardest right now. There are limited doorbuster sales, nothing bringing the consumers into the stores. That’s by design from a health and safety perspective,” Kotlyer said.

And even with the e-commerce sales gains this year, Kotlyer said “it’s not enough to make up for the brick-and-mortar shortfall.”

While those who can’t spend on travel but have savings in hand may elect to spend more this year, those purchases even in luxury categories won’t be enough to offset the lower spending levels by those needing to be more cautious, either because of job loss or lack of savings or even fears over a future loss of employment.

“Holiday sales might be flat once you take out the luxury purchases,” she said.

AlixPartners in September forecasted holiday sales from October through December to rise between 1 to 2.6 percent, based on a survey of more than 1,000 consumers.

“What we’re actually observing in the market is that most brands and retailers are scaling back on promotions. If you look at the number of days for promotions and the percentage of the discounts, it is less than it was last year,” Murali Gokki, a managing director at consultancy firm AlixPartners, said.

He said confidence has been moderating and there’s still concern over an economic recovery as threats of Covid-19 spikes continue across parts of the country and world.

“If we get to 3 percent, the historical average in the last five years, then we can call [Holiday 2020] a success,” Gokki said.

He’s seeing spending up for home categories and even video and entertainment, with two new gaming consoles out this year providing a boost to sales. As for apparel, the AlixPartners consultant called that a “tricky category.”

While consumers will gravitate toward athleisure so long as they shelter at home, he isn’t sure what that might mean for what happens once workers begin to head back to the office. While some people may need to buy apparel after seeing a change in sizing needs, no one knows whether workplace attire will change because it’s anyone’s guess what people’s preferences are going to be when that happens.

“Fashion brands will have a challenging time ahead of them preparing for how the consumer preferences are going to shift, which could begin starting in Spring 2021,” Gokki said, noting that the timing could depend on how fast vaccinations can be rolled out to the general public.