Consumers refuse to allow high prices to become the Grinch that stole Christmas.
Salesforce projections show that, despite a cautious consumer, many still plan to put some loot under the tree this year. But what quantity of gifts—and where they purchase them—may be changing.
Caila Schwartz, director of consumer insights and strategy for the technology giant, described the theme of holiday 2024 in one simple word: value.
“Behavior now is being solely dictated based on value, and there aren’t many other competing priorities that are influencing the consumer,” she said.
Even still, Salesforce projects that holiday spending will grow by a modest 2 percent since 2023, totaling $1.19 trillion. That may be because of the cost of items, rather than an influx of disposable income.
Salesforce data shows that price sensitivity is real for consumers looking ahead at the holiday season. Four in 10 consumers are buying less, and 85 percent of consumers are trading down for lower-priced goods. While general apparel and general footwear saw respective online sales growth of 2 percent and 1 percent year over year in Q1, luxury apparel saw a 2 percent decline and at-large luxury tanked by 10 percent in that same period.
But even as consumers trade down and purchase fewer items, they are still up against the reality of offloading spending onto credit cards and buy now, pay later services (BNPL), like Afterpay and Klarna.
Salesforce data shows 37 percent of consumers use credit cards more now than they did last year, and 43 percent carry more monthly debt. Simultaneously, 32 percent of consumers are using BNPL more often.
Consumers plan around Cyber Week
As consumers remain conscious about their spending, Black Friday and other retail holidays could be boon for companies slashing prices during Cyber Week.
Salesforce data shows that nearly seven in 10 shoppers said they plan to wait on making big purchases until Cyber Week. If Amazon Prime Days offers any forecast into retailers’ plans for what could be coming, discount rates could increase. Retailers other than Amazon saw a 6 percent increase in order volumes and a 3 percent YoY growth in online sales during Prime Day, partially attributable to a 10 percent increase in discount rate.
Salesforce projects the average discount rate for Black Friday to come in at 28 percent globally, with U.S. consumers seeing above-average discounts of 30 percent.
Though Cyber Monday has grown in recent years, consumers continue to put their trust in old faithful—Black Friday—to bring them the season’s lowest prices; 65 percent of shoppers indicated that they feel the day after Thanksgiving offers the best discounts of the year.
“Even though the holiday season overall is going to be moderate growth, Cyber Week itself has the potential to be really big,” Schwartz said. “Black Friday is not only the biggest in-store shopping day, but also the biggest online shopping day.”
Bargain buys before Black Fri
Black Friday is far from the only way consumers plan to spend less this holiday.
In line with their craving for value, consumers seem to be crawling toward purchasing from ultra-low-priced marketplaces like Shein, Temu and TikTok Shop. Salesforce calls these marketplaces Chinese shopping apps, because though they do not keep their official headquarters in China, they do have direct ties to the country.
Many of the goods sold through each of those marketplaces are shipped directly from China to consumers’ doorsteps, though both Shein and Temu have started to put down roots in the U.S. and are working to recruit U.S. brands on their respective marketplaces.
Temu is most popular among consumers, followed by Shein. Since April TikTok has increased its popularity by 24 percent, Salesforce said, bringing it into the No. 3 spot, just above AliExpress.
Half of consumers said they plan to purchase from a Chinese shopping app during the holiday season, with Gen Z leading the pack. Seven in 10 Gen Zers plan to purchase from one of the marketplaces this holiday season, as do 64 percent of millennials and 46 percent of Gen Xers. And even as the total amount consumers buy declines, nearly half of Gen Zers and millennials said they’re buying more items on the apps than they did last year.
By far, the driving factor appears to be the dirt-cheap cost of goods.
Nearly six in 10 consumers—58 percent—said they purchase items from these apps because they offer the lowest prices. The next most common consideration, fast shipping, came in 30 percentage points lower, with 28 percent of consumers saying they purchase from those companies for that reason.
Garf said several years ago, he had projected these apps would not take market share away from existing platforms and retailers. But with the rise in awareness about the Sheins and Temus of the world, that reality has changed drastically.
“They are taking market share from marketplaces, from the dollar stores, from the value and off-price retailers,” he said. “Consumers…have finite budget to spend, [and] more of that budget is going to be spent on the value side…The trick is, how do you get, as a retailer or brand, the other portion of it, because it’s going to be a portfolio approach for consumers.”
Garf did note that, consistent with his commentary in June, reported by Sourcing Journal, he does not expect fast-fashion marketplaces to take market share away from resale.
“Resale is unique, because it’s offering authentic, genuine merchandise for better value, and you’re not getting that [here]. You’re getting knockoffs and cheaper merchandise,” he explained.
While Salesforce did not have data to share on whether anti-China sentiment from politicians in an election year might impact consumer sentiment around shopping from apps, Schwartz said she doesn’t believe that’s something consumers take into consideration when making purchases.
“Ultimately, the phenomenon that we’re seeing in the consumer is they’re prioritizing their financial situation, so that means that they get certain products at a lower price so that they can travel and do the things they want to do,” she said.
Logistics landscape
Shein and Temu often ship their goods via air cargo.
But some companies that rely on maritime routes may need the magic of Santa’s sleigh to ensure their holiday stock makes it to them in time to sell it to consumers at full price.
With the threat of a strike looming over East Coast ports on Oct. 1, retailers and brands may have trouble getting re-buys in time for the end of the season; some may even struggle to get initial buys.
Salesforce projected earlier this year that middle-mile logistics costs would surge for retailers in 2024. Though many companies bought their stock early, Garf said those who got caught lacking could be in for a rude surprise if they shipped their goods over the ocean. He said both cost and availability of cargo space could be concerns for brands and retailers.
“What gets us nervous is, is it going to be the year of a pinch in the supply chain, where the product is just not getting taken off the ships and put into the domestic supply chain?” he said. “[By] October, generally, most, if not all, of the products are through the port and they’re making their way into the domestic supply chain and getting to the distribution center to then be allocated. But any of those last-minute [orders] or products that have been trailing and have been delayed at sea and are now getting to the port [late], there may be a real issue there.”
