Insight

Black Friday's success sets the stage for holiday uncertainties

By:
insight featured image
The retail industry is navigating a complex landscape, shaped by cautious consumer sentiment, supply chain disruptions, economic conditions, and shifting shopping habits.
Contents

Australian retail sales have experienced somewhat subdued growth rates in the last quarter according to MST Marquee, with 1.9 per cent growth in August, and slowed growth continuing into September (2.1 per cent) and October (1.3 per cent). In particular electronics, furniture, and recreational goods have faced challenges, while non-food online sales have taken a hit due to the evolving e-commerce landscape, with increasing delivery costs and reduced marketing spend.

This year’s Black Friday, a crucial event in the Retail calendar, served as a test for the industry’s resilience in the face of these challenges. It seems Black Friday was a success, providing a much-needed boost for retailers. The Australian Retailers Association (ARA) predicted $6.2b in retail trade between Black Friday and Cyber Monday – a significant increase of $200m from 2022. While trade figures are yet to come in, many retailers are reporting strong sales and healthy profit margin performance. This positive outcome, however, raises questions about the impact on the broader holiday trading season.

Traditionally, Black Friday marks the kick-off of the holiday shopping season, with consumers rushing to stores to secure the best deals. This year there’s a notable shift in dynamics. The prevailing uncertainty in interest rates has driven consumer sentiment down, yet while December is still king, the success of Black Friday has shown a clear trend that Christmas spending is increasingly being pulled forward.

Consumer behaviour is intricately intertwined with broader financial considerations, causing cautious consumer sentiment in the current landscape. The allure of promotions during this period provides a silver lining, as shoppers look to maximise value in the face of inflation and global uncertainties.

We’ve seen monthly retail turnover fall ahead of Black Friday according to the Australian Bureau of Statistics. Considering the current economic context, this is a strategic move by consumers who wait to leverage promotions as an opportunity to make essential purchases at discounted rates. This trend is likely to continue into Boxing Day sales, while the in-between period may suffer from reduced consumer spending.

The lingering uncertainty in interest rates adds an intriguing layer to the retail landscape, making planning efforts nuanced and complex for retailers who may have forecast demand earlier in the year. As consumers shop more conservatively, many continue to seek deals throughout the holiday season. Although the Reserve Bank of Australia has decided to hold the interest rate steady this month, trade is still likely to decline this holiday season as consumers aim to take advantage of holiday bargains.

Navigating economic uncertainty demands agility from retailers. Creating customised approaches to promotional activities and striking a balance between market trends and recent sales activity will be crucial this holiday season. The challenge lies in maintaining profit margins in this dynamic environment, carefully managing cost and implementing effective pricing strategies to ensure sustained profitability.

"Black Friday has been a welcome success for many retailers this year, that said, consumer confidence remains impacted by the ongoing uncertainty in the interest rates and this will likely influence behaviour through the holidays. Retailers will no doubt have this clearly in their minds as they navigate through the peak trading period by remaining alert and agile, adapting to uncertainty through evolving strategies," said Matt Darby, National Head of Retail and Consumer Products at Grant Thornton.

Learn more about how our Retail & Consumer Products services can help you

Learn more about how our Retail & Consumer Products services can help you

Visit our Retail & Consumer Products page

Subscribe to receive our publications

Subscribe now to be kept up-to-date with timely and relevant insights, unique to the nature of your business, your areas of interest and the industry in which you operate.