Americans are expected to spend billions on Cyber Monday sales, following on from record online Black Friday spending, but retailers will need to extend their heavy holiday-season discounts to win cash-strapped shoppers.
Adobe Analytics, which tracks online spending trends through data collected from its Adobe Experience Cloud service, predicts online spending for Cyber Monday will rise around 5.4% from last year to between $12 billion and $12.4 billion, adding to the $10 billion spent over the holiday weekend and the record $9.8 billion Black Friday splurge.
Overall sales for Cyber Week, which includes the five days beginning on Thanksgiving, were up 5.4% from last year to $37.2 billion, Adobe estimated.
'Favorable environment for consumers:' Adobe
“The decline in online prices over the last year has created a favorable environment for consumers with strong discounts this season that are tempting even the most price conscious consumers," said Vivek Pandya, lead analyst at Adobe Digital Insights.
Perhaps reflecting hybrid and work-from-home dynamics, or a younger consumer demographic, Adobe said, it expects Cyber Monday sales made through mobile devices to exceed orders from desktop computers for the first time on record.
Mastercard SpendingPulse, meanwhile, estimated that overall Black Friday sales rose 2.5% from last year, paced by an 8.5% increase in e-commerce sales. In-store transactions, Mastercard said, were up only 1.1%.
“Consumers are navigating the holiday season well and taking advantage of holiday promotions, giving them ample choice as they hunt for gifts for everyone on their list,” said Steve Sadove, Mastercard senior adviser.
“Consumers are also shopping smarter, using all of their tools – from searching across channels to cross checking on apps and websites – to maximize value while they spend time with friends and family.”
Related: Retail sales slow, but top Wall Street forecasts, as inflation pressures ease
Added pressure on retail profit margins
The overall spending backdrop, however, suggests added pressure on retail profit margins for this year's holiday season. That's as consumers grow more cautious on the state of the broader economy, run down their pandemic-era savings, and continue to feel pinched from high inflation and the resumption of student-loan payments.
The University of Michigan's closely tracked consumer-sentiment index, published last week, showed inflation expectations rising for a second consecutive month in November, while overall optimism slumped for a fourth straight month.
Adobe also noted that buy now, pay later purchases on Cyber Monday are likely to rise 18.8% from last year to a record $782 million.
"An uncertain demand environment pushed retailers to deliver big discounts this season, while also fortifying their e-commerce services with flexible payment methods," said Pandya. "Consumers have taken note and spent at record rates during the big shopping days, despite dealing with rising costs in other parts of their lives."
Earlier this month in its third-quarter-earnings report, Walmart (WMT) -), the world's biggest retailer, highlighted cautious consumer spending trends, noting "somewhat uneven" sales.
"We're seeing credit tightening, we've seen consumer balance sheets that are getting back close to pre-pandemic levels. You've got the repayment of student loans which affects about 27 million Americans," Walmart Chief Financial Officer John David Rainey said.
"There's a number of different reasons; we can't put our finger on it exactly. And so that's why we take a little bit more of a cautious stance as we go into the fourth quarter," he told investors on a Nov. 16 conference call.
Target (TGT) -) Chief Executive Brian Cornell also cited the impact of both high energy prices and overall inflation levels, noting that "it all puts pressure on discretionary spending."
"On the top line, our expectations reflect our continued near-term caution, leading us to maintain our prior guidance for a mid-single-digit decline in Q4 comparable sales," he told investors on Nov. 15. "On the bottom line, we're also maintaining a cautious posture, particularly because the fourth quarter is typically a very promotional season."
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