Last-minute discount hunters boosted retail sales during the holiday season compared to last year, Reuters from Mastercard says

By Savyat Mishra and Siddharth Cavale

(Reuters) – Price-conscious holiday shoppers opened their wallets for last-minute online discounts on clothes and socks, potentially benefiting retailers who also offered convenience options such as free shipping and high street pickup.

Online shopping has grown in popularity because of its convenience, similar or lower prices than in-store, the availability of services such as “buy online, collect in store (BOPIS)” and fast, free shipping, said Michael Schulman, retail expert at Running Point Capital Advisors. .

“The shortened holiday season this year compared to last year, with a tighter gap between Thanksgiving and Christmas, also left less time for in-store shopping and likely encouraged more phone and computer browsing and purchasing,” he said.

Although there were plenty of offers, retailers were disciplined with promotions. Goal Shares of (NYSE: ) and Dollar Tree (NASDAQ: ) rose nearly 3% in midday trading, while Walmart (NYSE: ) was flat.

According to a report by Mastercard (NYSE: ) SpendingPulse, online spending during the Nov. 1-Dec. 24 holiday shopping period rose 6.7% from last year, compared with a 2.9% increase for in-store sales.

This contributed to an increase in total spending of 3.8% compared to 2023, beating the previously forecast growth of 3.2% and surpassing the increase of 3.1% in the same period last year.

Steve Sadove, a senior adviser at Mastercard and a former CEO and chairman of Saks, told Reuters that spending rose even when factoring in higher prices caused by inflation. He noted that the last five days of the holiday season account for 10% of total holiday spending, showing “a lot of strength at the end.”

With just 27 days between Thanksgiving and Christmas — five fewer than last year — retail executives were less excited about the holiday season.

They described their consumers as “selective”, “cautious” and “conservative”, and as buying “based on needs”. As a result, many retailers doubled down on price cuts and promotional offers, Bernstein analysts said earlier this month.

Walmart said it would continue to lower prices by bringing back prices, while rival Target said it would increase its promotional intensity because shoppers aren’t as engaged without promotions. Dollar General (NYSE: ) said it expected profit to be pressured by increased promotions in the fourth quarter, while Kroger (NYSE: ) and Five Below (NASDAQ: ) also said they had to cut prices to be competitive.

Walmart and Target spent more on ads to reach shoppers on short video app TikTok and streaming platforms like Peacock and Hulu during the season, highlighting their membership programs that offer fast shipping and BOPIS.

Some of those attempts seem to have worked.

Salesforce (NYSE: ) estimates that BOPIS orders could double during the weekend before Christmas, accounting for nearly 40% of all online orders for retailers. And shipments are also strong, with FedEx (NYSE: ) estimating a higher-than-expected holiday shipment volume last week.

REAL CONSUMER POWER

Aireale Hobbs, 40, a resident of Huntsville, Alabama, began Christmas shopping for pajama sets, Stanley drinking glasses and toys for her family online on Black Friday.

She said she chooses to do most of her shopping online because of the convenience, more options and better deals.

“I got some things from Target that were discounted using the app,” said Hobbs, who works as a front desk clerk at a doctor’s office.

Laptops and TVs with new technology, lower prices and growing acceptance of lab-grown diamonds, and sportswear also encouraged shoppers to spend this holiday season, although promotions were at the same level as last year, Sadove said.

“Promotions were controlled. Nothing was particularly deep and there were no panic promotions. What we saw was real spending power,” Sadove said, adding that low unemployment and higher wages were squeezing personal finances.

Sales in the apparel, jewelry and electronics categories were up 3.6%, 4% and 3.7%, respectively, compared to last year, according to Mastercard. Online clothing sales in particular rose 6.7%, compared to 0.2% in stores.