Reimagining Retail: What This Year’s Thanksgiving Holiday Shopping Period Told Us | Dec 11, 2024

Summary

Behind the Numbers: Reimagining Retail – What This Year’s Thanksgiving Holiday Shopping Period Told Us

Podcast: Behind the Numbers: an eMarketer Podcast
Host: Sara Lebo
Guests: Zach Stambor & Rachel Wolf, eMarketer Analysts
Release Date: December 11, 2024

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1. Introduction and Guests

In the December 11th episode of Behind the Numbers: Reimagining Retail, host Sara Lebo welcomes two eMarketer analysts, Zach Stambor and Rachel Wolf, to discuss insights from the recent Cyber5 shopping period. This episode delves into the evolving dynamics of retail during the Thanksgiving holiday, highlighting significant trends and consumer behaviors.

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2. Key Takeaways from Cyber5

a. Overall Spending Patterns

Rachel Wolf highlights a notable shift in consumer spending patterns during Cyber5:

“[Shoppers] are spending more across the entire weekend. So it's not just about Black Friday or Cyber Monday, but people are spending on Thanksgiving on the weekend.”
[01:13]

This indicates a broader distribution of purchases throughout the holiday period, extending beyond the traditional peak days.

b. E-commerce Growth

Zach Stambor underscores the robust performance of e-commerce:

“E-commerce is doing very well. Consumers are largely going online and making their purchases... Growth exceeded a whole lot of forecasts.”
[01:30]

He further elaborates on the precision of eMarketer’s forecasts:

“The 8.2% year-over-year e-commerce growth across the Cyber5 from Adobe... we forecast 41.43 billion across the Cyber 5 and the Adobe number was 41.1 billion. So we were right on target.”
[02:26]

This growth aligns seamlessly with eMarketer’s overall retail e-commerce sales growth forecast of 8.1% for 2024, affirming the sector's resilience and expansion.

c. In-store Shopping Experiences

While e-commerce thrives, in-store shopping presents a mixed picture:

Rachel Wolf shares contrasting trends:

“Overall, foot traffic was down about 2.3%, but... Target saw a 17% bump in store traffic on Black Friday.”
[04:11]

This surge at Target is attributed to exclusive partnerships, such as the collaboration with Taylor Swift for her latest album releases, driving significant in-store engagement.

Zach Stambor comments on the broader decline in physical store purchases:

“Retailers gave consumers an actual reason to venture into the store to make the purchase. Now you don't need to... a lot of people just did that [shop online].”
[04:51]

The overall decline in foot traffic suggests a persistent shift towards online shopping, although strategic in-store incentives can still draw customers.

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3. Big-Ticket Item Purchases

Despite economic concerns, consumers remained active in purchasing high-value items such as TVs and furniture. Rachel Wolf attributes this behavior to strategic spending:

“They were waiting for precisely this moment to start spending on those things because they know... the biggest discounts.”
[05:22]

Zach Stambor adds another layer, linking purchases to anticipated price increases due to tariffs:

“Influencers urging people to buy stuff now before the price goes up... people are just weary of having to pay a lot extra.”
[05:35]

This anticipatory buying behavior is fueled by media narratives and past experiences with tariff-induced price hikes, encouraging consumers to capitalize on current deals to avoid future expenses.

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4. Influence of Generative AI in Retail

This year marks the significant impact of Generative AI (Gen AI) on the retail sector:

Zach Stambor reveals:

“Roughly one out of every five dollars spent online was influenced by Gen AI... retailers that offered generative AI or AI-powered agents saw a 2% higher conversion rate.”
[08:24]

This integration of AI tools enhances the shopping experience, subtly guiding consumers towards purchases without creating friction, thereby boosting overall sales performance.

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5. Buy Now, Pay Later (BNPL) Trends

BNPL services reached an all-time high during Cyber5, reflecting changing consumer payment preferences:

Rachel Wolf states:

“Nearly $1 billion spent using BNPL... the share of overall spending this holiday season is expected to be 7.7%.`
[10:05]

Zach Stambor provides context on consumer behavior:

“They’re stretching their budget and looking for any means of doing so... they just want to spend.”
[10:43]

This surge in BNPL usage indicates a preference for flexible payment options, allowing consumers to manage their budgets more effectively while maintaining purchasing momentum.

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6. Future Implications

The episode concludes with a discussion on the potential aftermath of heavy BNPL usage and anticipates a possible dip in consumer spending come January:

Zach Stambor compares it to previous spending patterns:

“I think it's similar to the way in which there's often a hangover effect in January... people generally just pull back in January and don't spend as much.”
[11:16]

This behavior underscores the cyclical nature of consumer spending, where substantial holiday expenditures may lead to more restrained financial activities in the subsequent month.

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Conclusion

The Cyber5 shopping period of 2024 showcased significant trends in e-commerce growth, strategic in-store incentives, the rising influence of Generative AI, and the widespread adoption of BNPL services. As retailers continue to navigate these shifts, understanding consumer behavior and leveraging technology will be pivotal in shaping the future of retail.

Thank you to Zach Stambor and Rachel Wolf for their insightful analysis, and to Liveramp for making this episode possible. Tune in next Wednesday for another episode of Reimagining Retail, and join Marcus tomorrow for more insights on Behind the Numbers Daily.

Transcript

[Sara Lebo]

Data collaboration enables innovative companies to uncover powerful new insights that transform customer experiences and fuel business growth. With Liveramp, marketers get the industry's only interoperable platform for data collaboration across every cloud, walled garden, and media platform. Learn [e-mail] hello, listeners. Today is Wednesday, December 11th. Welcome to behind the Numbers Reimagining Retail, an emarketer podcast made possible by Liveramp. This is the show where we talk about how retail collides with every part of our lives. I'm your host, Sara Lebo. Today's episode topic is a Cyber5 recap. Before we get into that, let's meet our guests for the day. Joining us are two of our analysts. First up is Zach Stambor. Hey, Zach.

[Zach Stambor]

Hey, Sarah.

[Sara Lebo]

Also here with us is Rachel Wolf. Hey, Rachel.

[Rachel Wolf]

Hey. Thanks for having me.

[Sara Lebo]

Thanks for being here. Okay, let's start off with the basics of cyber 5. What is your number one takeaway from the Cyber Week data? Rachel, why don't you go first?

[Rachel Wolf]

Sure. So I think one thing that stood out to me is just that shoppers are spending more across the entire weekend. So it's not just about Black Friday or Cyber Monday, but people are spending on Thanksgiving on the weekend.

[Sara Lebo]

Zach, what's your number one takeaway?

[Zach Stambor]

So I have a couple. Okay, I'll cheat and have a couple.

[Sara Lebo]

Great.

[Zach Stambor]

1. E commerce is doing very well. Consumers are largely going online and making their purchases. Even if they're venturing into the store, they're actually making the purchase online. So that's one thing. And then the other is that growth is pretty good. Growth exceeded a whole lot of forecasts. Our forecast was very much on target in terms of E commerce sales across the Cyber 5. And in particular, we were just about on the dot for Black Friday and Thanksgiving, which is really solid growth.

[Sara Lebo]

Yeah. And that's real growth, Right? That's not just inflationary growth.

[Zach Stambor]

Yeah, exactly. With inflation running at about like 2.3 ish percent, I think we're at this is actual volume. People are buying more stuff, which is notable in a difference from a few years ago.

[Sara Lebo]

What is one number that stood out to you? This Cyber5.

[Zach Stambor]

Yeah, the 8.2% year over year E commerce growth across the Cyber5 from Adobe. That's pretty strong growth. It's right in line, really, with our forecast. We forecast 41.43 billion across the Cyber 5 and the Adobe number was 41.1 billion. So we were right on target.

[Sara Lebo]

That's fascinating because our overall retail e commerce sales growth for 2024 is 8.1%. So that puts. Should you say Black Friday or Cyber Week?

[Zach Stambor]

Cyber5.

[Sara Lebo]

Cyber5. That puts that right in line with what we consider overall retail E commerce sales growth as well.

[Zach Stambor]

Oh, that's really interesting, Rachel.

[Sara Lebo]

What is one stat that stood out to you?

[Rachel Wolf]

So one stat that stood out was MasterCard spending pulses Black Friday data which showed that US retail sales, excluding autos, rose 3.4% year on year. And breaking that down even further for them, E Commerce went up 14.6%. So an even bigger jump than what Adobe saw. But in store was only up 0.7%, which really illustrates how E commerce has taken over Black Friday.

[Sara Lebo]

That is a bit higher than our overall forecasted retail sales growth, which we have at 2.8% for the whole year, not just for Cyber5 for 2024. So, yeah. Clearly shows that people are spending even more on Black Friday compared with the rest of the year. Okay, you mentioned in store, I did not go to stores on Black Friday or at all during Cyber5. Did either of you?

[Zach Stambor]

Oh, I did, and it was not pleasant.

[Sara Lebo]

So how did in storefare, not just in your personal experience, but across the board?

[Rachel Wolf]

I mean, it was pretty mixed. Overall, foot traffic was down about 2.3, but there were some pretty big winners, like Target, for example, which saw a 17% bump in store traffic on Black Friday, which I'm attributing to the Taylor Swift effect, given that they were the exclusive retailer for her era's tour book and the latest vinyl and CD edition of her latest album.

[Sara Lebo]

Is that a 17% bump over, like, a standard day or over Black Friday last year?

[Rachel Wolf]

Over Black Friday last year, I believe.

[Sara Lebo]

Gotcha. Okay. Props to Taylor Swift, who was embarrassingly, once again, my number one artist on Spotify this year.

[Zach Stambor]

I mean, it's just a throwback. That approach is a throwback to the way things used to be, where retailers gave consumers an actual reason to venture into the store to make the purchase. Now you don't need to. You can just go online, which is why a lot of people just did that.

[Sara Lebo]

Mm. One thing that you guys mentioned to me is that people were spending a lot on big ticket items. That seems like kind of a surprise, because the vibes, if that's a scientific measure, have been that money is kind of tight. So why are people spending so much on things like TVs?

[Rachel Wolf]

I think it's just because they were waiting for precisely this moment to start spending on those things because they know. They knew that that's when you're going to get the biggest discounts. On TVs, on furniture, all of those big ticket items.

[Zach Stambor]

Yeah, I think that's true, but I think there's another cause here and that's the election. Since the election, the Trump tariffs have really broken through. And I that's like in mainstream media. There have been articles on cnn, on the Wall Street Journal and the Times all about how prices are going to go up, but also on TikTok and a lot of influencers urging people to buy stuff now before the price goes up. And so I think a lot of people are just who are in the market for or thinking about perhaps buying a big ticket item like a TV are thinking, I might as well do it now before the price goes up.

[Sara Lebo]

Is this like a retailer strategy? Are they saying, hey, buy now before the price goes up because of tariffs? Is that a marketing approach?

[Zach Stambor]

I think some are leaning into that messaging, but I also think it's just kind of true. It does seem like prices will go up if there are tariffs. We saw this last time around with washing machines. There were targeted tariffs last time around.

[Sara Lebo]

Meaning the last time we had this president.

[Zach Stambor]

Correct. Yeah. So there were targeted tariffs on washing machines. The price of washing machines went up and so did the price of dryers, even though there were no tariffs on dryers. And so people are recognizing that the prices will go up. They were hit hard when we saw prices go up a couple years ago and they don't want to be stuck again having to pay a lot and they figured they might as well just bite the bullet now.

[Sara Lebo]

Do you think consumers have a long term enough memory to recall that tariffs had that effect?

[Zach Stambor]

I mean, I just think this message has broken through in a way that I think is kind of surprising given that there's so much going on at the moment. But inflation has been so jarring over the past few years.

[Sara Lebo]

Yeah.

[Zach Stambor]

And consumers are just weary of having to pay a lot extra or more than they're accustomed to.

[Rachel Wolf]

And I think it might also be the way that it's framed. Right. A lot of people are talking about how tariffs will cause inflation to spike again. And so I think when you frame it in that way, people are just more aware of. More aware of it.

[Sara Lebo]

Man. Imagine if it'd been framed in that. Just kidding.

[Zach Stambor]

I mean, I there what I there was that though, during the election. I mean, Kamala Harris constantly spoke about a 20%. How did you phrase it? Sales tax. It was going to be a tax of 20% on stuff. And I don't know, like people just didn't fully believe It. Until it, until it got elected.

[Rachel Wolf]

It wasn't on TikTok then.

[Zach Stambor]

Yeah, right. Yeah.

[Sara Lebo]

Until it wasn't brat enough.

[Zach Stambor]

Yeah.

[Sara Lebo]

I don't know what else stood out to each of you this Black Friday and Cyber5 in general that we have not mentioned yet.

[Zach Stambor]

I think this is the first year of Gen AI really having an effect on retail.

[Sara Lebo]

What do you mean by that?

[Zach Stambor]

So Salesforce had a number out there that it's like roughly one out of every five dollars spent online was influenced by Gen AI, which can mean a whole lot of different things. It can be a chatbot, it can be an AI powered tool, it can be a whole lot of things, but it seems to be working. Retailers that offered generative AI or AI powered agents saw had a 2% higher conversion rate than those that didn't. And so is that just that those.

[Sara Lebo]

Retailers are Amazon, you know.

[Zach Stambor]

Yeah, I think. Right. I do think there's a little nuance there that I. I'm glad you're calling out because the retailers that have it are bigger retailers that probably would have a higher conversion rate than other ones. But still, I think it's not nothing. And so I think we're seeing whether consumers recognize or not that they're using generative powered tools, that it's helping them shop.

[Sara Lebo]

And when you say whether or not they recognize it, I mean, you could search for something on Google, Amazon, I don't know, and not realize that you're getting Gen AI powered results necessarily, but it's still leading you to that conversion. That's probably the smoothest way that Gen AI shopping can take place.

[Zach Stambor]

I think it makes more sense that way. Yeah, I think it's right. Because, you know, why create a friction point when one doesn't need to exist? You can just put the technology into place and get people accustomed to it in a sort of sly manner.

[Sara Lebo]

Okay, aside from Gen AI, what else stood out to you?

[Rachel Wolf]

We also have pretty strong BNPL usage, so it was at an all time high on Cyber Monday. Nearly $1 billion spent using BNPL. So that's notable. You know, it's a sign that shoppers are turning to these alternative methods to just, you know, manage their budgets better.

[Sara Lebo]

Do you know what share that billion is of Cyber five sales or Cyber Monday sales?

[Rachel Wolf]

I don't know what share it is of Cyber Monday, but the share of overall spending this holiday season is expected to be 7.7%.

[Sara Lebo]

Okay.

[Rachel Wolf]

Per Adobe.

[Sara Lebo]

So a sizable share of that went to buy now, pay later. And what do you make of that in terms of Retail implications?

[Rachel Wolf]

Well, I think, you know, again, it just shows that people are being more careful about how they spend. They're looking to these alternative payment methods to spread out, spread out their spending a little more. But what's also interesting is that BNPL growth was actually less than Cyber Monday growth. So, you know, people are just saving, basically saving to spend on Cyber Monday and Black Friday and on these sales.

[Zach Stambor]

I don't know if I would characterize it as being careful. I think it's. They're stretching their budget and they're looking for any means of doing so. If it's bnpl, great. If it's a credit card, great. They just want to spend.

[Sara Lebo]

We've talked about this like the last three years, ever since the word klarna entered our vocabulary. Due to bnpl, will there be a January hangover where you're still spending those hundred bucks every week on things you bought a month ago? Will consumers spend less in January because they spent on BNPL in December?

[Zach Stambor]

I think it's kind of similar to the way in which there's often a hangover effect in January, whether it's bnpl, whether it's a credit. You get your credit card bill or just you saved up a bunch and you spent cash, people generally just pull back in January and don't spend as much.

[Sara Lebo]

Yeah. This is what we talked about last week related to using New Year's Eve resolutions or New Year's resolutions as a way to get folks to spend. It's that people are pulling back. So what is the angle to spend? Okay, well, that is all we have time for today, so thank you so much for being here, Zach.

[Zach Stambor]

Well, thanks for having me.

[Sara Lebo]

Thank you, Rachel.

[Rachel Wolf]

Thank you.

[Sara Lebo]

Thank you to our listeners and to Victoria, who edits the podcasts and deserves a cyber high five. We'll be back next Wednesday with another episode of Reimagining Retail, an emarketer podcast made possible by Liveramp. And tomorrow, join Marcus for another episode of the behind the Numbers Daily.