As consumers head to shopping malls, central business districts, and their favorite web browsers to open their wallets one more time in 2023 — Caden’s analysts have doubled back into what the last month can tell us about the home stretch and the year to come. 

Much has been made of the success of 2023’s biggest shopping weekend. Adobe Analytics tracked Black Friday online sales up 7.5% (non-inflation adjusted, so a meager ~3.5% adjusted for inflation) and Cyber Monday up 9.6%. Mastercard’s Spendingpulse report indicates an overall 2.5% increase (without adjusting for inflation) in ex-Auto Sales, which amounts to negative real growth.  

This analysis is focused on breaking down the acute drivers of consumer behavior that shake out as more nuanced impacts weeks and months down the road.

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Extended Discounting

The first secular trend worth investigating was the impact of extended discounting throughout November, as opposed to 20 years ago when Black Friday was a finite, highly-regionalized retail event. Despite overall increases (see above) in spending at an aggregate level, on a per-consumer basis, Caden observed statistically significant decreases in weekend spending for Amazon and Target. Additionally, moderate increases were measured at downmarket retailers like Walmart and Dollar General (3.1% and 1.7%, respectively). 

It would be, at best, opportunistic to categorize this as a reflection of a constrained consumer in a vacuum, but it does create a launching point to investigate this shift. What’s more interesting than a highly sensitive slice of consumer spending is the transformation in overall consumption patterns throughout November (Fig 1.1). Caden observed a 6.5% decrease in Black Friday Weekend's contribution to November sales, with national retailer Target experiencing a substantial decline of 21.6%. Walmart and Dollar General saw the opposite trend with 10% and 20% increases, respectively, in Black Friday sales contribution. Causality is out the window, but this is perhaps worth a deeper look for retail marketers (and merchandisers) nationwide.

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Driver of Consumer Behavior Change

The question remains who is driving consumer behavior change? With pandemic-era spending seeing a high negative correlation to income, a key point of validation is whether that pattern has held true across the income distribution in the post-stimulus, high-CPI reality of late 2023. 

Per the September ‘23 BLS statistics, the results track neatly to 2021-2022 patterns, with one notable exception: roughly the 2nd lowest quintile of household income (proxied somewhat as the “working poor”) saw catastrophic decreases (~27%) in November spending. Worth highlighting, and perhaps contextualizing, is the 2-3x increase in Credit Card delinquencies for similar income groups over the same period (see Fig 1.3).

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Buy Now Pay Later

This leads us to the final observation, which Caden covered last month. The hypothesis is somewhat simple: BNPL (“Buy Now Pay Later” products like Klarna, Affirm, Afterpay) are being used as a proxy for debt and as a near-zero interest rate loan by some of the most threatened portions of the US population. Adobe Analytics’ Black Friday report (above) shows BNPL share of Black Friday transactions up as much as 43% YoY , and analysts are expressing concern  that this trend may spell doom for many households. 

Caden’s data, with the actual frequency of BNPL transactions per consumer remaining remarkably stable over the past year (+/- 2% with no clear directional pattern), overall BNPL volume for that same consumer set has increased over 80%, which by the transitive property is a monumental increase in average BNPL transaction volumes (see Fig 1.4). 

Consumers are using BNPL for increasingly larger purchases, perhaps purchases that would have been credit purchases in the past. Early reads from projected December spending tells Caden (from a consumer behavior perspective) that BNPL has become the true substitute good for low-interest loans and is being used (maybe frighteningly so) to increase the buying power of a precarious consumer base. 

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