Retailers Push Sales, and Normalcy, but Economic Uncertainty Looms

After two years of pandemic improvisation and in-store restrictions, this year’s Black Friday felt like a return to normalcy.

Shoppers who ventured out on Friday, and even those who didn’t, saw a deluge of deals that had been missing the past couple of years. Many retailers pushed lower prices both in stores and online in response to Americans having recently shown they were more than willing to wait for a discount before making a purchase.

“I think we’re going back to what we had before the pandemic with what we’re offering on Black Friday,” said Stephen Lebovitz, the chief executive officer of CBL Properties, which owns about 95 properties, including shopping centers and malls across the United States. “There are changes, but it’s going to feel a lot more like 2019 Black Friday than anything in the interim years.”

Still, near-record inflation and dwindling savings kept some shoppers home and left retailers unsure what the season would ultimately bring.

Many well-off consumers remain stable financially and appear ready to spend, but others face far more economic uncertainty. That isn’t expected to change anytime soon. Analysts, economists and retail executives are monitoring a potential economic slowdown in the first few months of 2023 that could worsen consumers’ wariness.

That makes the holiday season — always the most important time for retailers — even more crucial this year.

As the day began at Macy’s Herald Square, the department store’s flagship location in Manhattan, there was a steady flow of customers, and store employees clapped as people entered. Some said they were excited to shop but had concerns over prices.

Tammy Freeman, 59, from New York, stood at the front of the line near the store’s main entrance, ready for her annual Black Friday excursion. She said that she was eager to buy various items, including a case for her daughter’s laptop, but noted that inflation was changing her general approach to spending.

“I have to budget more,” she said. “I have to catch the sales more.”

Eighty percent of holiday shoppers are likely to make a purchase from Black Friday through Cyber Monday, according to a survey from Bankrate. People pulled out their wallets on Thanksgiving Day as well, with sales up 2.9 percent compared with a year earlier, according to Adobe Analytics. Adobe estimated that spending for the holiday season would increase 2.5 percent from last year.

On Friday, bargain-hunting shoppers definitely seemed to have the power. Stores posted signs advertising 50 to 60 percent off items. At a Target in Springfield, Ill., shoppers walked around with 65-inch televisions in shopping carts, and some wore matching T-shirts that said “Gather, gobble and shop.”

In San Francisco’s Union Square, it was relatively quiet. By 7 a.m., when the line outside Macy’s had dissipated, it felt “more or less like a normal day,” said Clifford Cheng, a retail associate at the store.

At a nearby Neiman Marcus, only about a dozen shoppers waited outside ahead of the store’s 9 a.m. opening. Natali Carrasco, 20, and Batechaa Steele, 20, were first-time Black Friday shoppers at the luxury department store.

“We always come and shop here, but we always buy full price, so we wanted to see the sales,” Ms. Carrasco said.

Even before the start of the season, some shoppers were already cutting back on discretionary purchases, leaving retailers with an unusually high level of inventory. They want to unload as much of that as possible before the start of the new year.

“The more sales merchandise that they move through now the better,” said Kristen Gall, president of the online platform Rakuten, which offers cash-back deals. “Because if you get caught holding a lot of inventory in January and February and consumers pull back because things feel significantly more recessionary, that’s where the worry comes in for retailers.”

Despite the economic unease shoppers have expressed, retailers said they were optimistic.

“Even in really tough years Black Friday is a very strong day for us,” Jeff Gennette, Macy’s chief executive, said in an interview.

And there were promising signs. Forty percent of consumers said they planned to shop in malls this holiday season, higher than the 35 percent of consumers who did during the 2019 Christmas season, before pandemic lockdowns, according to a survey from the consultancy KPMG. Last year, the number of shoppers who said they planned to venture inside a mall was 31 percent.

Americans were also still purchasing gifts online. Adobe said online sales for Black Friday were expected to total $9 billion, up 1 percent year-over-year.

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Retailers took different approaches to entice shoppers to spend. Macy’s did not bring back the opening doorbuster deals — which went away during the pandemic amid social distancing guidelines — and instead offered sales throughout the day. It also continued the pandemic-era tradition of having Santa take photos with children while seated behind a desk, a sign that Covid concerns remain.

J.C. Penney leaned back into doorbusters for the first time since 2019 because it said it wanted to motivate discount-focused shoppers to get out to stores. For its 5 a.m. doorbusters, the department store chain deliberately kept “pre-inflation pricing” on key items like Instant Pots, bath towels and boots. Signs in stores trumpeted 65 percent off discounts.

“We think we’ll have a big volume of customers at the store, and to bring them in we know that value is very important to the consumer right now,” said Marc Rosen, J.C. Penney’s chief executive.

On its website, the mall owner CBL highlighted the discounts that stores like H&M and the children’s apparel retailer Carter’s were offering. Other retailers employed a similar strategy in the days leading up to Black Friday. J. Crew on Monday advertised 50 percent off purchases. On Gap’s website, a large black banner scrolled atop the page saying “HPY BLK FRI” and highlighting 50 percent off deals with an additional 10 percent markdown.

There are risks for retailers, however, in relying more heavily on deals. The practice erodes profit margins that buoyed them during the pandemic, when many Americans spent plenty on all sorts of goods and retailers did not feel the need to entice them with too many deals. There are also worries that shoppers will become so accustomed to sales that they will only buy when promised a lower price.

“Consumers understanding that they can wait out discounts, coupled with retailers’ drive to move goods, likely means that this Black Friday will be more important than Black Friday has been in a long time,” Simeon Siegel, a managing director at BMO Capital Markets, said. “Whether that’s good for the brands, whether that’s good for the consumer — that’s a separate conversation.”

Retailers are also competing more with entertainment options, like concerts and dining out at restaurants, than they have in the past couple of years. Consumers are expected to allocate a larger share of their holiday spending on experiences this year compared with last. The average amount that middle-income Americans, who make between $50,000 to $99,000 annually, spend on experiences is expected to increase 15 percent this year, according to a survey released in October from Deloitte.

Of course, not every retailer places so much importance on Black Friday.

The outdoor equipment retailer REI has remained closed on the day since 2015. This year, the company said it had decided to permanently give its workers a paid day off on Black Friday, encouraging them to spend time outside instead.

But that was the exception. Even while the total sales for Black Friday were still being tallied, many retailers were already looking to further entice shoppers by rolling out advertisements for more discounts on Monday.

“We believe that the consumer is quite aware of the fact that there’s plenty of inventory out there,” Richard Hayne, the chief executive of Urban Outfitters, said on a call with analysts this month. “And what they’re doing is waiting for big promotional events that normally occur on Black Friday and Cyber Monday in order to make their purchases.”

Retailers may need to offer more deals, he said, but “I don’t believe it will be a total blood bath.”

Isabella Simonetti and Kalley Huang contributed reporting.