The 2022 holiday season showed slow, but steady, improvement for the retail industry. As economic headwinds curbed spending capacity, online retail grew in the U.S. but at its lowest rate in years: up 3.5% to $211.7 billion, according to Adobe Analytics. Global digital sales topped $1.1 trillion for the season, while sales in the U.S. hit $270 billion, according to Salesforce.
Inflation was a major factor in slower growth despite heavy discounting by retailers. Adobe recorded full-year sales growth of 6.1%, largely driven by heavy spending early in 2022 that tapered off as inflation took its toll. Additionally, the receding pandemic meant that shoppers chose to put their discretionary income toward experiences rather than products.
“In general, consumer spending on goods has proven weaker as more Americans are spending available funds on services, travel and activities that were limited during the pandemic,” said Lisa Plonka, Partner and leader of Plante Moran’s Consumer Goods Practice. “For example, it would appear that spending on electronics decreased during this holiday season compared to a similar time frame in 2021.”
Price played a major role in determining products’ popularity: categories with a plethora of less expensive gifting options, like toys and sporting equipment, saw an average 2.4X lift in sales compared to the pre-holiday season, according to Adobe. By comparison, electronics saw a 1.4X lift, although another expensive category, jewelry, landed in the 2.4X category.
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Discounts Played a Big Role Late in the Season
As expected, promotions played a major role in setting the pace of the latter half of the season, with an average discount rate of 21% in 2022 compared to 19% in 2021, according to Salesforce. The top discount categories for the season as a whole included beauty, skincare and makeup with an average discount of 29%. Adobe found that multiple categories saw significantly deeper discounts in 2022 than the previous year, including:
- Toys: 34% vs. 19%;
- Electronics: 25% vs. 8%;
- Apparel: 19% vs. 13%; and
- Sporting Goods: 10% vs. 6%.
Promotions hit their peak during Cyber Week, when the average discount jumped to 30% in the U.S. and 27% globally, according to Salesforce. However, Cyber Week’s contribution to the season decreased to 16.7% from a high of 20% in 2019 as consumers spread their spending throughout the holiday season, according to Adobe.
Still, Cyber Week remained an important contributor to the season, and Black Friday once again retained its crown as the busiest in-store shopping day, according to data from Sensormatic Solutions. Small Business Saturday (the Saturday after Thanksgiving) was the second-busiest day in terms of traffic, and the remainder of the top 10 were spread across December — showcasing the power of the higher late-season discounts and the importance of catering to last-minute shoppers.
The needs of last-minute shoppers also may have contributed to the popularity of BOPIS, which remained elevated compared to pre-pandemic levels. BOPIS peaked at 35% of all orders on the Friday before Christmas, up from an average of 20%, according to Salesforce. Additionally, companies that offered BOPIS grew revenue nearly 7X faster than those without during the 10 days leading up to Dec. 15.
Prepare for a Slow Start to 2023
The key takeaway from the holiday 2022 season is that while things may be looking up due to slowing inflation, but shoppers are still price-shy and costs remain elevated, particularly along the supply chain. Slow but steady growth means retailers can be optimistic for the latter half of the year, but they shouldn’t lose sight of the challenges they will be facing immediately.
“It’s important for retailers to be prepared for softer consumer demand and to be very aware of changes in customer preferences and spending habits — providing value will be key,” said Plonka. “Also, while many consumers are happy to shop in-person again, ecommerce will continue to be a channel for growth, and it’s critical for retailers to evaluate the effectiveness of their online presence. Retailers should also continue to focus on inventory management, monitoring the availability of goods and stability of key suppliers, and most importantly, cash flow projections (cash will always be king!).”
