As the holiday season approaches, retailers are gearing up for Black Friday with enticing discounts and promotions. However, concerns are mounting as consumers face financial pressure due to dwindling savings and growing credit card debt. While inflation has eased in some areas, staple goods such as meat and rent continue to remain significantly higher than they were three years ago.

Barbara Lindquist, an 85-year-old from Hawthorne Woods, Illinois, plans to spend about $1,000 on holiday gifts for her extended family. However, she is more focused on finding deals due to the high prices of essential items. Lindquist, a preschool teacher, believes that purchasing gift cards will help her stick to her budget. She recently took advantage of discounts at Kohl's, purchasing discounted sheets and towels for friends visiting from Panama during the holidays.

To accommodate the financial constraints faced by consumers, many retailers have already reduced their inventory for the holiday season and started promoting sales earlier in October compared to last year. The trend of early shopping has become more pronounced during the pandemic, with supply chain disruptions leading people to buy early to ensure they get what they need.

Despite retailers' efforts to spread out holiday spending, it is anticipated that shoppers will focus more on deals and wait until the last minute to make purchases. Best Buy and Kohl's have adjusted their strategies by offering items at opening price points and simplifying deals, respectively. Target has observed that customers are waiting longer to buy certain items, such as sweatshirts and denim, opting to wait for colder weather. According to Target CEO Brian Cornell, consumers have shown remarkable resilience, but factors such as uncertainty, caution, and budget management are still top of mind.

The National Retail Federation, the largest retail trade group in the US, expects a moderate increase in holiday sales this year compared to last year. However, the pace of growth is projected to slow due to economic uncertainty. The group forecasts a 3% to 4% rise in holiday sales for November through December, in contrast to the 5.4% growth seen last year. This growth rate aligns with the average annual increase of 3.6% seen from 2010 to pre-pandemic 2019.

During the pandemic, with federal relief checks providing additional funds and limited options for spending, Americans significantly increased their spending. The holiday season in 2021 saw a surge in sales, with a 12.7% increase during the two-month period. Online discounts are expected to be more attractive this year, particularly for toys, electronics, and clothing. According to Adobe Analytics, toy discounts are anticipated to average 35%, up from 22% last year, while electronics and clothing are expected to see discounts of 30% and 25%, respectively.

The five-day Black Friday weekend, including Cyber Monday, is considered a crucial indicator of consumer spending. Sensormatic Solutions, a firm that tracks store traffic, predicts that Black Friday will once again be the busiest shopping day of the year. The top 10 busiest shopping days are expected to account for approximately 40% of all holiday retail traffic. However, industry experts like Marshal Cohen, chief retail adviser at Circana, believe that shoppers will be more focused, sticking to their lists and buying throughout the season at their convenience.

Despite initial optimism, retailers are growing concerned about a potential slowdown in spending that could impact sales on Black Friday and throughout the holiday season. Shoppers had previously demonstrated resilience, supported by a robust job market and steady wage growth. However, the pressure from dwindling savings, increased credit card debt, and persistent inflation is now affecting consumer behavior. In October, shoppers reduced their spending, marking the end of six consecutive months of growth. Retailers such as Walmart and Best Buy have reported a weakening consumer, with Walmart offering a muted annual sales outlook and Best Buy seeing shoppers trading down to cheaper products. Even luxury retailers like Saks Fifth Avenue have noticed a softening in consumer spending.

Despite these concerns, stores have been proactive in offering Black Friday-like deals throughout the month of November, which has helped boost business. Adobe Analytics reported that online consumer spending from November 1 to November 20 reached $63.2 billion, a 5% increase compared to the same period last year. This surpasses their estimated 4.8% growth for the two-month holiday period.

As retailers prepare for Black Friday, they are aware of the challenges posed by consumers' financial constraints. While discounts and promotions are expected to attract shoppers, the overall sentiment remains cautious. Retailers will need to navigate this uncertainty and adapt their strategies to meet the evolving demands and expectations of consumers.