Will holiday sales be ho, ho, ho or ho hum?

Economic headwinds have been impacting retail performance for most of 2023. Could Black Friday and the upcoming holiday season bring relief?

This question is the subject of a new analysis by Placer.ai, which noted that ongoing inflation and high interest rates resulting in tighter consumer budgets have kept retail visits below 2022 levels since late July. The visit gaps remained relatively small throughout August, when back-to-school requirements gave families and students a reason to shop, but traffic fell in September after the season ended. And while the year-over-year (YoY) visit gap has narrowed slightly since the beginning of October — perhaps thanks to a slew of early promotions — this year’s early holiday season appears off to a slow start, the report noted. 

But comparing 2023 retail visits to pre-pandemic 2019 numbers reveals the staying power of the extended holiday season that characterized 2021 and 2022. The year-over-four-year (Yo4Y) visit gap between mid-August to mid-September was wider than the YoY gap, perhaps due to the different macroeconomic environment in 2023 and 2019. But since the week of Sept. 25th, the Yo4Y visit gap has remained narrower than the YoY visit gap – perhaps because this year’s consumers have already begun buying their gifts. Still, the impact of this year’s early holiday shopping was more muted than in 2022 – so at least some consumers may be waiting for the deeper Black Friday discounts or the urgency of the approaching holidays to begin shelling out for gifts.

[Read more: Survey: 70% of Americans plan to shop for themselves during holiday sales]

The weaker extended holiday season in 2023 also comes through when analyzing the foot traffic performance during Target and Walmart’s recent October sales days. Both chains launched promotional events intended to compete with Amazon’s Prime Day – Target Circle Week on Oct. 1-7 and Walmart Deals Holiday Kickoff on Oct. 9-12. Neither chain received a significant foot traffic boost from these promotions – though there we declines in visit gaps and the impact may have been more pronounced online – which also indicates that many consumers are potentially still holding off on major holiday shopping. 

How are key categories performing ahead of Black Friday? 
With some holiday shopping already underway, analyzing recent foot traffic numbers to key retail categories may reveal which categories are likely to come out ahead in Q4. 

As expected, discount and dollar stores have consistently outperformed other sectors throughout the summer and into the fall, and are likely to continue drawing visits from consumers looking to save on both essential and discretionary products. Clothing chains — boosted by the ongoing strength of off-price brands – have also stayed ahead of other sectors and may well see an influx of visits as the end of the year draws near and shoppers look to purchase festive holiday attire. Superstores have also seen smaller YoY visit gaps than some other categories, although visits have slowed down in recent weeks. 

A little more surprisingly, the office supplies category also is staying close to its 2022 visit numbers, following a slump at the height of the Back-to-School season when some shoppers likely traded down in favor of discount and dollar Stores. Although office supplies are not traditionally a strong contender for holiday-related shopping, the segment’s relative strength could indicate that consumers are still willing to visit specialty stores to purchase brand-name items for specific uses. 

Meanwhile, YoY visit gaps at recreational and sporting goods chains, electronics stores and department stores widened significantly since the end of August — but more recent data looks a little more promising, with all three categories now seeing their visit gaps begin to shrink. If this trend continues, a variety of categories may well receive a much-needed Black Friday boost. 

[Read more: Retail finds itself lost in space]

Unknowns abound ahead of a key holiday season 
Early October foot traffic data does not seem to offer much information regarding the fate of the upcoming holiday season. Although YoY visit gaps do appear to be shrinking — a sign that the retail space is moving in the right direction — the lack of significant traffic spikes during major promotional events also indicates that most shoppers have yet to get into the holiday spending spirit. The wider macroeconomic uncertainty — including the impact of the reinstatement of student loan payments — also makes it difficult to predict the upcoming months. Still, one thing does appear likely: consumers are remaining cautious, and retailers that want to benefit from the traditional holiday retail boost might need to get creative to convince shoppers to walk through their doors. 

For more data-driven retail insights, visit placer.ai/blog.