‘Retailers cannot discount forever’: Will mega-sales and deals be back in 2024?

Australians who crashed Harvey Norman’s website and spent record amounts snapping up Black Friday bargains on their smartphones shouldn’t expect the same cheap and sweet deals next year.

After 13 interest rate rises and skyrocketing inflation across fuel, food and electricity bills, retailers have been forced to discount heavily to tempt shoppers to part with their money, a practice they may unwind at some point.

Australians rushed into stores and jumped online to seize on Black Friday deals – but they may not be as good next year.Credit: Elke Meitzel

“Consumers are waiting for good deals to appear before they pull the trigger on purchases,” said Deloitte Access Economics partner David Rumbens. “Competition is fierce for the limited discretionary spending available, and retailers appear to have pulled no stops this November.

“But retailers cannot discount forever,” he said.

Retailers discounted earlier and more aggressively to entice consumers who were saving their dollars for a good deal before Christmas. NAB transaction data indicates shoppers spent a record $8.7 billion across the four-day Black Friday and Cyber Monday period, buying cosmetics, cameras and other electronics, new outfits, furniture and toys.

Cost-of-living pressures also meant Australians stocked up on household essentials such as pantry items, cleaning products, dishwashing tablets and toilet paper, according to Amazon.

“There’s always multiple data points to get a clearer picture on how this went, but the anecdotal evidence is that Black Friday sales went really well,” said KPMG head of retail and consumer, James Stewart.

The spending spree was very much a global phenomenon: shoppers around the world spent a collective $US70.9 billion ($107.5 billion) that weekend. In Australia, online sales shot up 14 per cent on Black Friday with 78 per cent driven by mobiles, according to Salesforce data. Retailers slashed prices by 27 per cent on average.

The higher volume of deals this year comes off the back of the pandemic, when retailers didn’t need to discount so heavily as many people in lockdown turned to online shopping.

“Retailers have had a discount holiday,” said Stewart. “I think that period’s over now.”

Premier Investments chairman Solomon Lew was pleasantly surprised by the Black Friday sales.Credit: Eamon Gallagher

Last weekend, online and bricks-and-mortar retailers notched what they described as “record” figures from Black Friday. Online furniture retailer Temple & Webster’s revenue doubled this year to $17.4 million over the four-day period, while white goods giant Harvey Norman founder Gerry Harvey said sales were “very strong”, even despite the revenue it lost due to the website effectively crashing from the volume of traffic.

Smiggle and Peter Alexander operator Premier Investments’ chairman, Solomon Lew, was also somewhat taken aback by how well the weekend went. “It was stronger than I expected,” Lew said.

Are we too used to good deals?

With the year’s end just around the corner, retailers are holding their breath to see just how much Black Friday stole Christmas’ thunder. Christmas is widely predicted to be a quieter affair this year, with Australians planning to spend less on gifts and supermarkets anticipating more celebrations at home.

More Australians are expected to cook and celebrate Christmas at home this year.Credit: iStock

“Higher-than-normal levels of discounting might make sense now to lure in cautious consumers and to get rid of high levels of inventory, but it may not be sustainable in the long term,” Rumbens said.

Stewart said the best retailers are separating their Black Friday stock from Christmas stock to offer customers a point of difference and avoid a “cannibalisation effect”.

“What you don’t want to do is sell all your great product or discount on Black Friday and not have much to go to market with on Christmas … to try and protect margin sales and performance over both months,” he said.

“If many retailers could achieve about the same result or slightly better in December than [they] did last December, I think a lot of retailers would take that and say that’s a reasonably good outcome.”

Rumbens is anticipating some bright spots in the economy next year. He and Stewart pointed to strong population growth in helping to lift retail sales from minus-0.9 per cent in the 2023 calendar year to an expected 1.4 per cent in 2024. Wages are also expected to grow, which will loosen wallets.

But after a year of luring budget-conscious customers with great deals, retailers may have inadvertently created a new normal.

“The loss of margin may make sense if the result is gaining market share from other retailers or building customer loyalty for higher margin purchases later,” said Rumbens.

“There is a risk, however, that consumers get used to products being lower priced, and be less likely to purchase at full price – even when discretionary spending power recovers.”

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.