Editor’s Note: JoAnn Martin is VP of Industry Strategy and Market Development at JDA Software. The opinions expressed in this commentary are her own.
Talk of a trade deal between the United States and China has added even more uncertainty to an already dizzying situation. The back and forth has left consumers, retailers and manufacturers perplexed about how they will fare during the rapidly approaching holiday shopping season.
Yet, we still expect to see strong sales this upcoming Black Friday/Cyber Monday weekend. Here’s why:
Retailers stocked up in anticipation
Retailers are continuously keeping their eye on the triggers impacting the global economy so they can anticipate consumer demand for their goods and services. The trade war is no exception.
The good news for consumers is that retailers already anticipated the potential price increases from the tariffs. According to the National Retail Federation, a trade association, many retailers pre-bought inventory for their stores last year — far ahead of the next expected tariff increase on December 15. Because of this, consumers will see few, if any, price increases passed onto them this holiday season. In fact, we will not likely see prices increase until spring 2020, assuming the December 15 tariff increase goes into effect.
This is supported by a sample of our retail customers who have told us their sales and margin plans for Black Friday were locked in over the summer, when they purchased most of their inventory. Retailers want to stick to their plans and maximize margins, but the wildcard is consumer confidence.
Although consumer confidence declined in November, the number is still strong. If consumers get stodgy with their dollars, retailers may be forced into deeper discounts. But they ultimately plan to wait for a strong signal before making any drastic moves.
Consumers will do their holiday shopping earlier
Over the years, we have seen the holiday shopping frenzy start earlier, with many retailers starting to push promotions as early as Veterans Day. Consumers haven’t balked at this idea. A recent survey found that some consumers started their holiday shopping as early as September.
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This was especially helpful for retailers this year. Given that Black Friday falls nearly a week later this year than it did in 2018, there are fewer weeks before Christmas for retailers to run promotions. We expect consumers who typically put off their holiday shopping well into December to feel the pressure of the shortened period between Black Friday and Christmas, thereby boosting early holiday sales and drawing even more attention to Black Friday.
There’s another factor at play as well. Barring a trade deal between China and the United States in the coming days, most consumers are now aware of the looming December 15 tariff date. They will assume that prices may go up after that date. And given the later-than-normal Thanksgiving timing, many are having a moment that sounds something like, “How is it already almost December?” Consumers will feel pressure to act now and act fast. Although some may have gotten a jumpstart on their shopping due to those early sales in November, most will look to Black Friday as an opportunity to get the best prices before tariffs kick in.
Despite the impending trade war, Black Friday should prove to be a banner day for retailers, with what could end up being another record year for holiday sales.