The gains in retail sales outpaced inflation.
US retail sales continued to show resilience in the face of inflation and moves to cool demand in October.
Numbers released by the US Commerce Department on Wednesday tell the story:
Overall retail sales grew 1.3% on a monthly basis from September, totalling $694.5 billion. That’s a big gain over last month’s report, when sales for September were unchanged from August.
US retail sales, Oct. 2021-Oct. 2022. (Courtesy of FRED)
On an annual basis, retail sales were up 8.3%. That outpaces the October inflation rate of 7.7%. That's significant, as retail sales are not adjusted for inflation.
Core retail sales, as measured by the National Retail Federation to exclude automobile dealers, gasoline stations and restaurants, showed October sales were up 0.7% from September and up 6.5% unadjusted year over year
Nonstore retailers, which include ecommerce, posted a 1.2% increase for the month, while growing 11.5% year-over-year.
US nonstore retail sales, Oct. 2021-Oct. 2022. (Courtesy of FRED)
Other core categories showing change included furniture and home goods (+1.1% monthly), health and personal care stores (+0.5% monthly). Meanwhile, electronics and sporting goods/hobbies each declined 0.3%. Apparel showed no change from the prior month.
Grocery stores (+1.4% monthly) and gas stations (+4.1%) continue to see gains in spending amid a period of 40-year-high inflation that is driving up food and fuel prices.
The results covered a month when retailers sought to kick off the holiday shopping season. October brought a host of early holiday deal events from Amazon, Walmart, Target and Wayfair, as they sought to move overstocked inventory and meet demand from consumers seeking to get a jumpstart on their lists.
“October’s performance is a strong foothold as we go into the holiday season,” said NRF Chief Economist Jack Kleinhenz, in a statement. “Spending has gradually slowed but remains solid...Early holiday deals that enticed customers appear to underly the October numbers and more promotions will be seen in November and December, which are historically the big holiday shopping months.”
The data also comes as the job market continues to remain historically tight, bolstering the availability of steady income to make purchases.
“In October we saw the strength in the labor market continue to support consumer purchasing power,” said Michelle Meyer, US chief economist at the Mastercard Economics Institute, in a statement. “Coupled with heavy online promotions, consumers got a head start on their holiday shopping, fueling another strong month of retail sales.”
The report will undoubtedly lift spirits 10 days before the heart of the holiday shopping season is set to arrive with Black Friday. It comes on a week that Walmart, Lowe's and Home Depot each reported better than expected results, for the most recently-completed quarter as well.
However, high inflation and the Federal Reserve's moves to curtail demand through four interest rate hikes are leading many retailers to temper forecasts for peak season.
Amazon's recent warning of reduced sales for the quarter cast a pall over investors, if not retail as a whole. Likewise, Walmart on Tuesday forecast tepid net sales growth for the fourth quarter of 3%, which would significantly trail growth of 8.2% for the quarter running August-October.
Reports of a consumer pullback are also starting to surface. On Wednesday, Target reported comparable store sales growth of 2.7%, which came in far under its forecasts. Nearly all of the slowdown was driven by our discretionary categories, apparel, home and hardlines, executives said. The retailer, which has a mix that is tilted more toward general merchandise than Walmart’s grocery-heavy baskets, also said it is taking a more conservative outlook ahead of the holiday season.
"In the latter weeks of the quarter, sales and profit trends softened meaningfully, with guests' shopping behavior increasingly impacted by inflation, rising interest rates and economic uncertainty,” said CEO Brian Cornell, in a statement. “This resulted in a third quarter profit performance well below our expectations.”
A tough season seems likely, yet the latest retail sales data offers the latest sign that spending may continue to hold up, as it mostly has all year.
MasterCard SpendingPulse released a forecast this week indicating that Black Friday is set to see a 15% increase in retail sales over last year. The season is expected to be even more promotional than usual amid inflation, yet MasterCard expects a more concerted return to in-person shopping to bring gains. In particular, department stores are expected to see a 25% year-over-year increase in sales across physical and digital channels.
“Expect Black Friday shopping to be in full force across channels this year,” said Steve Sadove, a senior advisor for Mastercard and former CEO of Saks Incorporated. “While retailers have already been heavily discounting this season, consumers and retailers are likely holding out for some special offers to land on the biggest promotional day of the year.”
Plus, check out peak holiday shopping weekend results shared by Klaviyo, Wayfair and Ace Hardware.
At Amazon, 2022 delivered the "biggest ever" Thanksgiving weekend to date.
ustomers purchased a record number of products from Thanksgiving through Cyber Monday, the company said in a news release Wednesday. Amazon did not disclose sales figures, while sharing that “hundreds of millions” of products were purchased.
"This was a record-breaking holiday shopping weekend for Amazon,” said Doug Herrington, Amazon’s CEO of Worldwide Stores, in a statement. “Customers shopped millions of deals this weekend and we have many more amazing deals to come.”
It came as record sales and traffic were reported for US ecommerce as a whole during the peak shopping weekend.
Despite the growth, Amazon is still expressing a cautious approach that led it to forecast more tepid sales growth over 2021 for the all-important holiday quarter. According to Bloomberg, CEO Andy Jassy said Wednesday that inflation is leading shoppers to seek deals.
“Consumers are spending, but they’re being careful about trying to stretch their dollar,” Jassy said at the New York Times DealBook conference.
This year, Amazon sought to get an early jump on the shopping holidays to reach bargain hunters. It began Black Friday deals on Thanksgiving, as many shoppers turned to their phones after dinner. For Cyber Monday, deals started on Saturday.
Over the Turkey 5, the best-selling categories were home, fashion, toys, beauty and Amazon devices. Electronics including Echo Dot, Fire TV Stick, and Apple AirPods were the best-selling items. Other top sellers included Hasbro Gaming Connect 4, Burt’s Bees Christmas gifts, apparel from Champion, apparel and shoes from New Balance, the Amazon smart plug, Echo Show and Nintendo Switch.
Amazon said that more than $1 billion in sales were generated for US small businesses through the weekend. This includes third-party sellers that offer goods on Amazon’s marketplace and access its logistics services through Fulfillment by Amazon (FBA).
“If the news of Amazon having the best Black Friday weekend in company history is any clue, it was historic for 3P sellers in many ways,” said Jon Elder, who consults with Amazon sellers as founder and CEO of Black Label Advisor.
Elder said that the vast majority of FBA sellers experienced “tremendous” year-over-year growth through the weekend.
“Sellers noticed that customers were hungry for deals like never before and coupons played especially well,” Elder said. “Some sellers opted to not sign up for deals and still experienced historic traffic and sales.”
Sellers also ramped up PPC, or pay-per-click, in which brands and sellers access sponsored product space to appear in prominent positions on the highly-trafficked marketplace.
“With inflation on the rise, it was more important than ever to increase brand awareness through PPC ads, including video ads. Expect to see brands make this a ‘best practice’ going forward,” Elder said.
Despite all the sales ringing up, Black Friday did bring one curve ball, as a glitch in Amazon’s ad tools led to inaccurate reporting of spend that misled brands and advertisers. According to Business Insider, the sitewide reporting error caused agencies and other ad buyers to either overspend, or miss out on sales as a result of underspending. While a spokesperson said the issue was fixed, it caused a state of confusion on retail’s most important day of the year, as many were forced to wait for a fix.
Nevertheless, the weekend's overall results serve as a reminder that the Thanksgiving shopping period remains the largest weekend of the year for ecommerce, even as Amazon has introduced Prime Day and this year’s early October holiday kickoff event, which it dubbed Prime Early Access Sale.
The Prime sale events are “unique to the Amazon ecosystem, but many Americans simply don’t show up for those events as much because of the time of the year," Elder said.
"Black Friday weekend remains king and the numbers prove that."
Here are a few more key data points over the Black Friday-Cyber Monday weekend that were shared this week:
How many sales do the volumes of messages being sent by brands account for? One of the largest platforms is offering hard numbers. Klaviyo, which serves direct-to-consumer businesses, said revenue attributed to its SMS and email marketing messages reached $2.2 billion during Black Friday-Cyber Monday. That represents a 46% increase in dollars over 2021, while total order count reached 34% year-over-year. The growth was even more staggering in SMS-attributed sales alone, which grew 200% in dollars and $190 in order count.
Black Friday was the highest day for message sends, but Cyber Monday closed the gap from 2021, with 47% growth.
This came after businesses using the platform sent a combined 10.7 billion emails and text messages—up 41% from 2021.
While Klaviyo’s growth is likely a factor, it’s a fair bet that a shift toward owned marketing channels following Apple’s App Tracking Transparency played a role in this growth.
A pair of retailers in the furniture and home improvement categories released sales results showing growth.
Wayfair, the furniture home goods marketplace, reported a “low single digit sales increase” over 2021 for Thanksgiving weekend. Over the five days, 73% of the orders were from repeat customers, while “hundreds of thousands” of new customers ordered from Wayfair for the first time. Wayfair said its revenue strengthened following an early November earnings call, in which the company shared its revenue was down 10% quarter-to-date.
Ace Hardware, meanwhile, may known for its local stores, but ecommerce was the focus of its holiday update. Black Friday brought a record online sales day for the home improvement and tools retailer, posting 45% growth over 2021. Cyber Monday also saw a year-over-year jump of 33%. Ace said demand spiked for grills and smokers, electric mowers and snow blowers, while power tools also remained a popular category. In all, Ace saw a 33% increase in ecommerce sales over 2021 during the five-day weekend.
Ace sells through its ecommerce site, but its omnichannel model remains heavily linked to its neighborhood-level stores. The company said that 90% of online orders are either picked up in store, at curbside or delivered by store associates.
“Our continuous investments in the digital and omnichannel shopping experience make it easy for customers to shop Ace any way they prefer," said Bill Kiss, head of digital at Ace Hardware, in a statement.