Black Friday 2023 is here! The official post-Thanksgiving holiday shopping season where Long Island businesses make most of their 2023 profits has begun. After three years of inflation, supply-chain issues, and increased costs for interest rates, inventory, wages and energy, Black Friday couldn’t have come soon enough for the merchants throughout Long Island’s downtowns.
A recent survey of 7,396 randomly selected U.S. businesses owners said that over the past 18 months, increased interest rates have eaten into their profits, reduced revenues and reversed any pre-pandemic growth. More than 67% indicated an interest rate reduction of at least 3% would be required before they envisioned any business activity returning to where it once was. However, with the Federal Reserve ruminating over inflation, increasing interest rates—or keeping them where they are at a 22 year high of 5.5%—any interest rate reductions to decrease rates by 3% to 2.5% are way off in the distance and are frankly considered unrealistic.
It’s not only interest costs that have small businesses concerned. Respondents also noted they have had to navigate rent increases and both the cost and availability of workers—all without the ability to raise prices that would otherwise cover these costs, plus a modest profit. Furthermore, 53% responded they were making half or less of their pre-pandemic earnings. This was an increase from 50% reported in July 2023. Clearly, small businesses have anxiety over what they can expect this holiday shopping season, and this year they aren’t taking any chances when enticing shoppers toward their stores. With household debt increasing by $228 billion in the quarter ended September 2023 to $17.3 trillion—along with credit card debt increasing by $48 billion to $1.08 trillion—some retailers are relying on discounts to drive demand among cautious consumers.
Rather than waiting for Black Friday discounts to attract shoppers, whose credit card balances are $154 billion more than a year ago, (the largest annual increase since 1999) discounts offered this October are far more prevalent as compared with prior years. Additionally, the depth of these discounts, along with the increase in the total amount of items on sale, are higher than in the past four years. It’s hard to ignore these signals that retailers might be worried about 2023 holiday demand.
Adobe Analytics found that deep discounts and increased “buy now, pay later” programs for apparel, appliances and computers, were significantly higher this October than in 2021 and 2022. Further, online apparel reductions were 9% lower this October, compared with 2% in 2021 and 5% in 2022. As to the impact of online sales on brick-and-mortar retail stores, the National Retail Federation reported that October 2023 online sales grew nearly 6% to $76.8 billion, increasing over 2022 when nearly 30% of all holiday sales occurred online, at non-store locations.
This holiday shopping season will be challenging for Long Island’s Main Street retailers; in previous years consumers were flush with cash from the various stimulus programs and could pay the inflation-heated higher prices.
However, this year is different. Cash has been exhausted, causing shoppers to make careful choices about their spending. To attract these consumers, retailers have to stay one step ahead. It’s Black Friday or bust.
Martin Cantor is director of the Long Island Center for Socio-Economic Policy and former Suffolk County economic development commissioner. He can be reached at [email protected].
Opinion
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