When retailers raised the possibility that supply chain snarls could lead to empty shelves over the holidays, shoppers listened.

For the first time in nearly a decade, e-commerce spending on Black Friday in the US fell from the previous year, dipping slightly to $8.9 billion, down from $9 billion in 2020, while sales on Thanksgiving day remained flat year-over-year, according to preliminary data from Adobe. As of 9 p.m. Eastern Time on Cyber Monday, spending topped $7 billion — on track to match the $10.8 billion consumers spent on Cyber Monday last year. Meanwhile, American retailers saw 21 percent fewer visits to stores between Friday and Sunday compared with the same period in 2019, according to RetailNext, an analytics company. In-store sales fell just five percent, reflecting higher prices.

But at least some of those missing dollars were spent earlier in November. Between Nov. 1 and Nov. 28, consumers spent $99 billion online, according to Adobe, up 13.6 percent year-over-year and 47 percent compared to the same period in 2019.

We are expecting 2021 to cool down on a strong note.

A number of fashion retailers have seen their sales recover to pre-pandemic levels and beyond, as the economy has bounced back from the pandemic. For many brands, a lacklustre Black Friday was by design, encouraging consumers to shop earlier than usual to reduce the strain on their supply chains, which have seen disruptions from factory closures and congested ports. The strategy appears to have worked: Adobe says retailers are still on track for a 10 percent year-over-year increase in holiday spending. This year’s early bird sales is an acceleration of an existing trend where retailers offered promotions before Black Friday weekend to avoid the holiday rush, which can overwhelm carriers’ abilities to ship online orders and store inventory to their destinations.

“We are expecting 2021 to cool down on a strong note,” said Katherine Cullen, senior director of industry and consumer insights for the National Retail Federation.

Some retailers did see a Black Friday bump. Sephora and Ulta saw their traffic spike more than 20 percent and 10 percent, respectively, compared to Black Friday two years ago, according to early traffic data firm Placer.Ai, while off-price chains like T.J. Maxx and Ross Stores posted single-digit increases. Meanwhile, Kohl’s and Nordstrom Rack were among the brands that saw traffic fall compared to 2019. Overall mall traffic dipped as well.

Whether retailers can extend the holiday cheer into the new year is another question.

Labour shortages and soaring prices of raw materials, as well as logistics services, are pushing up costs. While consumers have tolerated higher prices this year, they may shop less if inflation continues to bite. Some brands are struggling to come up with products to sell: Gap Inc. cited pandemic-related factory closures and congested ports for lower profits in its most recent quarter. Nike, too, mentioned in its earnings report in September that increased freight costs have had a negative effect on margins, though its gross margin was able to expand due to a bigger mix of full-price sales.

Unless there is some relief from inflation we could see demand soften.

While brands can nudge consumers to shop earlier, raise prices or offer fewer promotions, many of the factors they’re dealing with are ultimately outside their control.

“Unless there is some relief from inflation we could see demand soften,” said Rod Sides, vice chairman and US retail, wholesale and distribution leader at Deloitte. “A lot of it depends on the macroeconomic cycle,” he added.

Much also depends on how quickly supply chain challenges are addressed. The worst may be over: logistics experts have noted that backlogs at global ports have eased, and new shipping containers will be available next year to better meet demand. Still, Sides and others said it could take at least six months or more to get back to normal.

“A lot of the issues will be solved on different timelines,” said Joel Rampoldt, a managing director in the retail practise at AlixPartners. “The shortage of drivers and the shortage of containers certainly won’t be sorted at the same time.”

The Bright Spot

The lack of inventory and ensuing high prices have resulted in the lowest levels of promotions in years. Average markdowns among mid-range luxury fashion retailers so far this quarter dipped to 28 percent from 55 percent in the fourth quarter of 2019, research firm Cowen found.

“You will see more targeted promotions, like a deal of the day or limited-time offers like promoting different items over the weekend,” Cullen said. “As brands have more data on customers, they can be personalised and more targeted on their approach.”

If retailers can continue into 2022 with similarly light degrees of discounting, it may be a sign that consumers are adapting to a new normal in retail: paying for products at or close to full price.

The true test, according to Rampoldt, will come sometime next year, when a few retailers will inevitably start marking down heavily again in order to drive sales.

“That’s when the really interesting thing happens — will all other retailers go back to the same promotional [cadence], or will they maintain the discipline across the board?” he said. “You’re only as smart as your dumbest competitor.”

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