Impact of Retail Economics

Thanksgiving Holiday Weekend Sees Record Number of Shoppers A record 200.4 million consumers shopped over the five-day holiday weekend from Thanksgiving Day through #cybermonday, surpassing last year’s record of 196.7 million. The figures surpassed National Retail Federation initial expectations of 182 million shoppers by more than 18 million. “The five-day period between Thanksgiving and Cyber Monday represents some of the busiest shopping days of the year and reflects the continued resilience of consumers and strength of the economy,” said NRF President and CEO Matthew Shay. Consumers utilized #online and #instore channels throughout the weekend, with 121.4 million people visiting physical retail locations to browse items and make in-store purchases. This figure is consistent with 122.7 million in 2022. Online shoppers totaled 134.2 million, up from 130.2 million last year. Black Friday continued its streak as the most popular day for in-store shopping, with 76 million shoppers opting to visit bricks-and-mortar locations, up from 73 million in 2022. About 59 million consumers shopped in stores on the Saturday after Thanksgiving, down from 63.4 million last year. Black Friday was also the most popular day for online shopping. Roughly 90.6 million consumers shopped online on Black Friday, up from 87.2 million in 2022. By comparison, approximately 73 million consumers shopped online on Cyber Monday, down slightly from 77 million last year.  Consistent with last year, about 44 million consumers used their home desktop or laptop to shop online on Cyber Monday. Another 40.5 million shopped online using their mobile devices, down from a record 45.7 million in 2022 but still well above pre-pandemic levels.  The top destinations for Thanksgiving weekend shoppers were online (44%), grocery stores and supermarkets (42%), department stores (40%), clothing and accessories stores (36%) and electronics stores (29%). Consumers spent $321.41 on average on these items, consistent with $325.44 last year. Approximately 70% ($226.55) was spent on gifts. The top gifts shoppers purchased during the five-day period were clothing and accessories (bought by 49% of those surveyed), toys (31%), gift cards (25%), books, video games and other media (23%), and personal care or beauty items (23%). Consumers reported that on average, 55% of their Thanksgiving weekend purchases were driven by sales and promotions, up from 52% in 2022. Retailers have continued to respond to earlier holiday demand with sales and promotions throughout the season. 55% of consumers took advantage of early holiday sales and promotions. About one-third shopped explicitly in the week leading up to Thanksgiving (Nov. 16-22).  Like last year, 85% of consumers had started holiday shopping as of Thanksgiving weekend and are about halfway done. #retailing #brands Kohl's Walmart Amazon Macy's Randa Apparel & Accessories Haggar Clothing Co.

Cracks in Spending and Manufacturing Begin to Form as Tariffs Filter Through the Economy 📉 What we expected for April retail sales has now materialized: a sharp pullback in consumer spending at retail stores and restaurants following months of stockpiling ahead of tariffs. 🏭 In a separate report from the Federal Reserve, manufacturing output declined by 0.4% in April—the first drop since October 2024. Even though prices have not risen as sharply as anticipated, falling confidence and weakened expectations have pushed consumers into a more cautious stance—particularly when it comes to durable goods, which are especially sensitive to both tariffs and income volatility. Within the retail sales report, the decline in the control group—used as a proxy for goods consumption in GDP—is a concerning signal as we head into the second quarter. 📊 Retail sales weren’t the only data pointing to softening demand. The unexpected drop in producer prices also reflected weakening spending, especially for discretionary services like air travel, financial services, and trade services—a proxy for retail and wholesale margins. The wide gap between CPI and PPI data suggests that, in April, businesses relied on existing inventories to shield consumers from rising input costs. But that came at the expense of business margins, which were compressed. That buffer may not last much longer. According to Walmart, the company plans to raise prices later this month in response to rising tariffs. ⚠️ We are now witnessing the first-order effects of tariffs on the economy—through reduced spending. The second-order impact—on prices—will likely emerge in the coming months, adding further pressure on demand. While a recession is no longer our base case over the next 12 months due to the recent reduction in tariffs, the likelihood has increased that the U.S. economy will endure several quarters of sluggish growth, with inflation remaining high enough to prevent the Fed from cutting interest rates.

The future of holiday marketing comes down to a new equation. And most brands aren’t solving for it. When I look at how consumer behavior has shifted, the holiday path to purchase no longer resembles a funnel. It is an intricate mix of: Searching  Scrolling Streaming Shopping  …happening all at once. Last season, 64% of U.S. shoppers blended these behaviors, moving across tabs, apps, and platforms constantly. On average, people now engage with over 130 mobile touchpoints every day. That complexity is changing how purchases happen. Spontaneous holiday buys dropped from 30% to 26% year over year, while researched purchases went up. And 61% of shoppers now say they are more choiceful with how they spend, largely due to economic uncertainty. Google calls this the “new value equation.” To feel confident, today’s shoppers validate their decisions on three fronts: 1. The right price – Nearly half will actively compare prices and wait for promotions. 2. Product confidence – 66% say quality and durability matter most, with YouTube now ranked the #1 source for product reviews. 3. Purchase convenience – 92% of in-store visits begin with an online search, and checkout friction can instantly kill momentum. Holiday success will depend on showing up across the 4S behaviors with accurate product data, trusted creator content, and frictionless purchase experiences. Strategies around this value equation will convert cautious researchers into confident buyers. Those who adapt to the new value equation will capture more market share and build lasting trust when it matters most.

Retail spending was about as flat as it could be last month, meaning consumers spent about the same amount on retail such as gas, clothing, food, cars and online shopping as they did the month prior. Typically, retail trade grows slightly each month, and in March we saw a big jump as consumers likely preemptively made purchases in preparation for tariff price increases. Today’s early estimate — which will be revised — suggests a pullback may be beginning. People tend to reduce spending on discretionary items when the economic outlook is grim or uncertain. We’ve seen consumer sentiment souring over the past few months as people find it difficult to know what to expect with new and developing economic policies, and generally that negative sentiment translates into behavior changes. Even though tariff talks of late suggest the impact of these import taxes won’t be as dramatic as initially thought, they still represent a pretty significant shift in trade relations with the potential for real effects on the economy. Though today’s wholesale #inflation numbers and earlier consumer inflation figures suggest inflation continues to cool, that’s expected to change as price increases on imports make their way into the U.S. #economy. Most (85%) of Americans have concerns about the evolving tariffs, according to a recent NerdWallet survey. Their concerns include affording the things they need and even a potential #recession. As such, 45% say they’ll be spending less on non-necessities in the coming 12 months, a sentiment that appears to have made it into today’s hard economic data. Aforementioned NerdWallet survey stats: https://lnkd.in/gAaZe5ii

Shoppers can’t stand when toothpaste, deodorant and other items are locked up behind glass display cabinets at stores. Customers, accustomed to taking whatever they want off a shelf, don’t like to push a button on the display case and impatiently wait for an employee to come open it so they can buy something for $5. No surprise then that locking up products leads to lower sales for retailers. “When you lock things up, for example, you don’t sell as many of them. We’ve kind of proven that pretty conclusively,” Walgreens CEO Tim Wentworth said on an earnings call this month. But the company plans to keep doing it anyway. That’s because “it is a hand-to-hand combat battle still” to stop merchandise from being stolen, Wentworth said. Walgreens is looking at “creative things” to stop theft without resorting to locking up products, Wentworth said, but he didn’t “have anything magnificent to share” yet. Walgreens and other retailers are trying to balance deterring theft with making stores easy to shop. Companies must walk a delicate line between protecting their inventory and creating stores that customers don’t dread visiting. Chains are willing to accept lower sales that result from locking up some products rather than lose the products to shoplifters, which hits their profits, analysts say. It’s also cheaper for them to lock up products than add more employees, security and other major investments that may limit theft but make the store unprofitable to operate. A Walgreens spokesperson told CNN that locked display cases were the “most efficient solution to combat retail theft.” The company “continuously review(s) the impact of these actions on sales” and tests new strategies to protect inventory and make it easier for customers to access products, the spokesperson said. Wentworth’s comments quickly spread on social media. “Walgreens management realizing no one wants to wait 12 minutes for assistance opening unlocking my $4 deodorant,” one user wrote on X. “I don’t want to press the button. I don’t want to find you. I just want to go grab some deodorant and check out…If I see it locked up I leave,” another posted on TikTok. And analysts say putting merchandise under lock and key isn’t a long-term solution. It keeps customers away – and possibly sends them into the waiting shopping carts of online retailers like Amazon. Amazon CEO Andy Jassy said last year that the “tough experience” of going into a store with locked-up products was pushing people to shop online. “Locking a lot up is not a good strategy,” Scott Mushkin, a retail analyst at R5 Capital, told CNN. “Why go to a store if you have to wait for someone to open up the case? It’s a blunt tool and self-defeating.” https://lnkd.in/eANmyG9H

5 insights from the biggest weekend in retail: 1. Shopper Behavior - 89% of shoppers last Cyber Five weekend did their shopping on Black Friday, and only 45% did their shopping on Cyber Monday, yet Cyber Monday generated almost $3 billion more. - 37% of shoppers spent less this year than 2022. 19% spent more and 44% spent about the same. 2. Online vs In-Store - 33% of Cyber Five Shoppers shopped primarily online in 2023. - Black Friday eCommerce sales in U.S increased 8.5% year-over-year while in-store sales rose 1.1% 3. Purchases - 36% were buying gifts for others but 8% shopped for gifts exclusively for themselves and 24% primarily for themselves. 4. Price Sensitivity - When surveyed, shoppers said that rising prices impacted their shopping compared to earlier this quarter. - In early Q4, 22% expected economic conditions to have a significant impact on their holiday shopping. But once they shopped, 35% of all Cyber Weekend shoppers said that rising prices had a significant impact. 5. Level with the Shopper - Sales from “Buy Now, Pay Later” flexible payment options increased by 47% compared to last Cyber Five weekend. - $17B in Buy Now Pay Later, used with 37% of US Gen Zers and 32% of millennials - Salesforce recorded that push notifications, SMS and OTT messaging via platforms like Facebook messenger or WhatsApp increased by 30% year-over-year. What stat from the above got you thinking the most? Let me know!

Brands that used to ship from abroad to the US under the de minimis have two options now that the de miniminis is gone (for China but soon to be everywhere). Here’s a breakdown but we wrote articles on both options below: Option 1: Domecile inventory locally in the US. This is what Temu and Shein are doing. The arbitrage of avoiding duties but shipping cross-border are done, so might as well bring inventory into the US and fulfil locally. Local shipping is cheaper, local shipping is faster, returns are easier and most importantly you can unambiguously declare your factory cost when paying tariffs. Option 2: Continue to ship cross-border into the US. The benefit here is that you get to pay duties only when you sell the item and ship it. The problem is you can’t pay the duty on the factory cost as you could in option 1. At best, you would have to pay duties on wholesale value which is 30- 50% higher than your factory cost. So your duty costs are in effect 30-50% higher for cross-border than they are for in-country fulfillment.

Retail sales pulled back in May, reflecting the dynamic of consumers both pulling forward and pulling back on spending. Earlier in the year, consumers pulled forward purchases of large ticket items like cars, as they anticipated the price impacts of impending tariffs. With those items purchased, consumer spending dropped in May. Consumers also pulled back overall spending in May. They showed greater reluctance to spend amid concerns about where the economy is headed. Even when excluding vehicle sales, consumer spending contracted 0.3% in May, down from 0% growth the previous month. This is a surprise since analysts had expected this category of consumer spending to grow in the month. For many months, economists have been surprised that the Trump trade war has not caused an increase in inflation. This report may help explain why we're not seeing the projected price increases. A tariff is a tax that is imposed on an importer of a good into a country. Imposing this tax definitely has an economic impact. But the exact impact is hard to predict. Some analysts predicted that the tariff cost would be pushed on to consumers in the form of higher prices. But this becomes difficult if consumers aren't willing to pay the higher prices. This report shows that consumer demand is weakening, which will further constrain the ability of retailers to increase prices. https://lnkd.in/g5PZsmxh #economy #retailsales #consumer #spending #tariffs

Sharing PwC's Holiday Outlook with insights. Consumers are staying connected to holiday traditions—with travel, travel-driven entertainment, and shared experiences holding steady or even rising slightly—while practicing more thoughtful, value-driven spending. 📉 – 5% drop in average holiday spending vs. 2024 (first decline since 2020, but survey data is from June when there was greater tariff uncertainty). 🌎 Tariff worries = 10% less on gifts + more caution overall. 💹 90% of tariff-concerned shoppers cutting back overall vs. 75% all other 👩🎓 Gen Z pulling back hardest: – 23% (after +37% growth LY). 🎁 Gift spending down 11%, from $814 → $721 per person. ⚠️ 84% of consumers expect to cut back over the next 6m—especially on dining 🍽️, apparel 👗, and big-ticket buys 🛋️. ✈️ Travel & entertainment buck the trend: up a modest +1%. 🛍️ Retail takeaway: Consumers still want to celebrate, but they’ll choose value + meaning + emotion. This means compelling assortments and a differentiated customer experience. 🌟 I am seeing retailers do really well in this environment. Bloomingdale's is strong & Macy's is stabilizing, American Eagle Outfitters Inc. had a surge in demand, Ulta Beauty very strong, and the value segment (Walmart) is holding steady. #retail #holiday2025 https://lnkd.in/gB3VkMYz

Shrink outside the box: “Is it the right thing for the customer to lock up product?” Bines asked Retail Brew. “One hundred percent no. There’s not a CEO or a retail leader in the world that would say that is customer-friendly.” One mystery surrounding locked-display cases is how that solution can be better than the problem it ostensibly solves: When they find that what they’re shopping for is locked up, fewer than one in three shoppers (32%) bother to summon an employee to unlock the case, with 55% of them not buying an alternative in the store but rather shopping elsewhere, according to a reader survey from Consumer World. Results from a Retail Brew reader poll were even more stark, with fewer than one in five shoppers (19%) saying they'd summon an employee if something they wanted to buy was locked up; 46.4% said in that circumstance they’d purchase the item online instead, and only 8.5% said they’d buy something similar in the store that wasn’t locked up. Retailers can track shrink, but often not whether the products even made it to shelves but rather were stolen in warehouses, en route to stores, or from stores’ back rooms. However, thanks to viral videos of bands of shoplifters sweeping products off shelves, Bines said an inordinate amount has been attributed to shoplifting. “Yes, organized theft exists, but it’s much easier to attack a train…than it is to run into 15 CVS’s and grab a bunch of Old Spice,” Bines said. But even when stores do have high levels of shoplifting, Bines said flummoxing shoppers with locked cases is not the solution. “We have got to make sure everything we do starts and ends with, ‘What does our consumer want, and how do we give it to them?’ And then we figure out how to make money,” he said. https://lnkd.in/e4V4PqB8