Black Friday Sale 2022: Blowout Bargains Smell Musty This Year | Tech News

Black Friday Sale 2022: Blowout Bargains Smell Musty This Year

Black Friday Sale 2022: The shopping holiday will see record online discounts on everything from air fryers to tablets.

| Updated on: Nov 23 2022, 20:56 IST
Black Friday
Black Friday Sale 2022: While the markdowns will be welcomed by many cash-strapped shoppers, the holiday deals underline companies’ struggle to work through bloated inventories pressuring their profits. (Bloomberg)

Your Black Friday bargain is most likely spring's leftover sweatpants.

American retailers have too much stock of everything from toys to women's casual tops. While the markdowns will be welcomed by many cash-strapped shoppers, the holiday deals underline companies' struggle to work through bloated inventories pressuring their profits. 

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To recap: In 2021, supply-chain snarls left stores scrambling to fill empty shelves. Black Friday deals were stuck in the Pacific. As orders slowly made their way from Asia in the early part of this year, consumers started to rein in spending amid soaring inflation, only buying things they needed (e.g., food) and giving up splurges and impulse purchases. Suddenly, a dearth of exercise bikes and kitchen appliances turned into a glut that needed to be heavily discounted. 

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A simple analysis of the spread, or difference, between sales and inventory growth shows the mountain of unsold goods in the US has shrunk since the first quarter. But it hasn't completely dissipated.

Macy's Inc. has managed its inventory well throughout the year, but Kohl's Corp. remains overstocked compared with last year. Target Corp.'s inventory increased in the third quarter to about 50% above where it was during the same period three years ago. About a third of that growth reflected new items arriving early as supply-chain knots loosened. At Walmart Inc., inventories, though significantly reduced, remain elevated compared with pre-pandemic levels. 

Retailers in the business of selling non-essentials are especially ripe for dramatic discounting this holiday season. Analysts at UBS Group AG said Target was being particularly aggressive in promoting home furnishings, electronics and toys. Chief Executive Officer Brian Cornell said during last week's earnings update that the firm “faced an unexpected gross margin rate headwind from a higher-than-expected mix of promotional sales, as guests moved away from full-price purchases.''

This weekend will see record online discounts for categories including electronics and toys, according to Adobe Analytics. Stacey Widlitz of SW Retail Advisors says the majority of the 60 chains she tracks across the US and Europe are more promotional than last year. In 2021, deals were mostly down from or similar to 2020, when they had already been reined in. This year, markdowns will be back to 2019 levels, she said.

Given the extent of excess inventory, combined with the shift away from pandemic purchases, the deals on offer this week will comprise current season stock as well as items that have been hanging around since the spring. For instance, shoppers can find apparel basics at Target for as low as $3, or an air fryer convection oven for 70% off on Amazon, or a kids' tablet reduced 46% at Walmart.

As Americans focus their spending on groceries and other essentials, they'll need such bargains to consider buying a set of scented candles or new yoga pants.

The picture in Europe is more complex. Black Friday has become a fixture across the Atlantic over the past decade. But it's probably the biggest act of self-harm in the history of retail, as all it does for most chains is pull forward sales that would have happened later at higher prices. Money through the checkout may increase, but profits are sacrificed.  

PwC expects UK consumers to spend £7.5 billion ($8.9 billion) this Black Friday, £500 million more than last year. Even as Britons face escalating energy costs, food inflation and rising mortgage rates, demand is so far holding up. But for European shoppers, who are also being squeezed by higher energy prices, the war in Ukraine is weighing on confidence.

While many discounts appear to have been planned, for example, at electronics retailers Currys Plc and AO World Plc, which can work with their suppliers months in advance to offer eye-catching deals, others look more knee-jerk. For example, Marks & Spencer Group Plc, traditionally a bellwether for the British retail sector, is now offering 20% off of all coats, jackets and boots. (Europe's fairly warm autumn so far may be good for consumers' heating bills, but it's less helpful for sales of outerwear.)

On both asides of the Atlantic, there is a standoff between stores and shoppers. Consumers' budgets are under pressure, and they know retailers have too much stock. While October retail sales were resilient — no doubt helped by early Black Friday discounts at the start of the month — companies including Target, Macy's and Kohls saw a slowdown in spending later in October and into November. 

Against this backdrop, retailers must hold their nerve, sticking as much as possible to planned promotions rather than offering deeper discounts to stimulate sales or offload unwanted stock. After all, this will be the first holiday season in three years that economies will be fully open, bolstering gift and food buying.

Whether companies or consumers blink first will determine if this crucial trading period turns out to be a sequel to 2021's revenge spending — or spring's big-box bloodbath.

Andrea Felsted is a Bloomberg Opinion columnist covering consumer goods and the retail industry. Previously, she was a reporter for the Financial Times.

Leticia Miranda is a Bloomberg Opinion columnist covering consumer goods and the retail industry. She was previously a business reporter at NBC News and a retail reporter at BuzzFeed News.

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First Published Date: 23 Nov, 20:55 IST