Adobe Projects Holiday Sales Up Just 2.5% Online – WWD

Adobe expects U.S. online holiday sales to hit $209.7 billion during the holiday 2022 season, representing a mere 2.5 percent growth year-over-year.

The projected paltry online gain — unadjusted for inflation — results from expected record levels of discounting and shoppers increasingly returning to stores after two years of avoiding them and shopping much more online due to the pandemic. The holiday season will also be impacted by an uncertain economic environment, the volatile stock market, and the rising costs of borrowing.

Adobe’s online shopping forecast for the 2022 holiday season, issued Monday morning, covers the period from Nov. 1 through Dec. 31 and analyzes more than 1 trillion visits to U.S. retail sites, 100 million stock keeping units, and 18 product categories.

“Consumers are battling inflationary pressures but getting the best discounts they’ve seen in years because retailers have quite a bit of oversupply of inventory. They will definitely be spending earlier and spreading their spend across the season because discounts are spreading across the season,” said Vivek Pandya, lead analyst at Adobe. “The supply chain has eased and the demand has slowed for goods so retailers are trying to offload inventory and drive up growth by bringing prices down, which means cutting into profit margins but also opportunities to win consumers and drive loyalty for the long term.”

Amazon’s second Prime Day this year, Tuesday and Wednesday this week, will be a major factor in kicking off a lot of gift shopping by Americans, way before the traditional holiday season begins, and industry-wide discounting.

Last week, Cowen & Co. gave a dim assessment of the state of retailing, forecasting nominal U.S. holiday 2022 sales, both online and in stores, up 6.5 percent, but considering inflation of about 6 percent, “real” retail sales growth will come in only 0.5 percent ahead. Cowen’s projections exclude food and gas.

“There are record high levels of inventory across the sector with demand slowing. Consensus gross margin expectations into 2023 are too high as markdown allowances rise, storage costs rise, higher-cost inventory flows onto income statements, and foreign exchange transactional pressure is rising,” Cowen reported. “Inventory continues to expand through a mix of cost inflation and unit growth.”

During the 2021 holiday shopping season, $204.5 billion was spent online, growing 8.6 percent year-over-year, with consumers uncertain about returning to physical stores due to lingering pandemic concerns, Adobe reported.

According to Adobe, discounts are expected to hit record highs this year for categories such as electronics, toys and computers, and groceries will hit a record $13.3 billion in online spend.

Cyber Monday is expected to remain the year’s biggest online shopping day, driving a record $11.2 billion in spending, increasing 5.1 percent, year-over-year, Adobe indicated.

Black Friday online sales are projected to grow by just 1 percent, year-over-year, to $9 billion, while Thanksgiving sales are set to fall to $5.1 billion, down 1 percent year-over-year.

“These major shopping days are losing prominence as e-commerce becomes a more ubiquitous daily activity, and as consumers see discounts continuing throughout the full season,” Adobe stated.

Adobe expects Cyber Week (Thanksgiving to Cyber Monday) will bring in $34.8 billion overall, up 2.8 percent year-over-year. “This represents a 16.3 percent share of the full season, down from 16.6 percent in 2021,” Adobe stated.

“The shape of the holiday season will look different this year, with early discounting in October pulling up spend that would have occurred around Cyber Week,” said Patrick Brown, vice president of growth marketing and insights at Adobe. “Even though we expect to see single-digit growth online this season, it is notable that consumers have already spent over $590 billion online this year at 8.9 percent growth, highlighting the resiliency of e-commerce demand.”

Adobe expects electronics to drive $49.8 billion of online spending, up 2.9 percent.

In apparel, shoppers are expected to spend $40.7 billion online this season, representing a 6.7 percent decline, reflecting increasing consumer interest in physical stores as pandemic-related anxieties subside.

Adobe expects groceries to drive $13.3 billion of spending online, representing 10.5 percent growth, including inflation.

Through the entire season Adobe expects discounts for computers to be as high as 32 percent, on average, and up from 10 percent in 2021. Sporting goods discounts are seen at 17 percent; furniture and bedding, 11 percent.

“Thanksgiving Day will be the best day to shop for electronics, while Black Friday will have the best deals for televisions,” Adobe stated.

The Saturday after Black Friday will have the biggest discounts for toys, with the best deals for apparel and sporting goods arriving on the Sunday after Thanksgiving, Adobe predicted. The software giant added that the best deals for computers and furniture will be on Cyber Monday and appliances will see top discounts on Dec. 1.

In other insights, Adobe sees buy now, pay later usage slowing due to the slowdown in consumer spending and “challenges in demonstrating value to mass consumers.” Also, Adobe believes curbside pickup has “ingrained itself with shoppers, and will remain widely used this upcoming season, peaking from Dec. 22 and 23 at around 35 percent of all online orders, while remaining around 25 percent through November.