What Does November’s Discount Explosion Say About the State of the Holiday Consumer?

It’s fair to wonder whether merchants will soon pull their hands down from happy high-fiving over strong November sales and begin wringing them over the ample discounts they offered inflation-weary consumers during Cyber Five 2023.

The long Thanksgiving to Cyber Monday weekend was a selling success, with e-commerce sales up 8 percent over a year ago, according to data from commerce protection provider Signifyd. The five-day festival of shopping contributed to a better-than-expected November, which saw sales for the entire month also finish 8 percent higher than last year and ahead of early holiday projections calling for a 5 percent increase, Signifyd reports.

But what the Cyber Five might be best remembered for is the prodigious use of discounts by online shoppers. Discount use was up 38 percent over 2022, a year that was highly discounted in its own right. On Black Friday alone, the number of orders placed with a discount code was up 46 percent year-over-year.

Holiday Shoppers Are Focused on Value

“Consumers have been telling us that they would be looking for deals this holiday season," said Signifyd Data Analyst Phelim Killough, who oversees the company’s Holiday Season Pulse Tracker. "What we saw over the Cyber Five was that they were true to their word. The questions are: Were those robust sales in late November a pull-forward from December sales? And will consumers continue to buy, even if discounts aren't as generous as they were last month?”

Whatever the case, the signs point to consumers who are spending despite feeling financial pressure. Rising discount use is one clue. (Discount code use for the entire month of November was up 28 percent compared to last year.) Another indicator: Buy now, pay later (BNPL) sales were up markedly from a year ago, increasing by 17 percent over 2022 during the Cyber Five. Moreover, the growth of BNPL sales accelerated dramatically during the second half of November when year-over-year growth reached 12 percent, far outpacing the 6 percent annual growth rate for the entire month.

Are Retailers Engaged in a Holiday Season Race to the Bottom?

Despite retailers’ frequent talk of avoiding a race to the bottom in pricing, it’s fair to wonder whether deep discounts during the holiday season have joined free and easy returns on the list of consumer-friendly programs that can’t be easily reversed.

Just how big was 2023’s discount bonanza? The numbers tell the story. Over the Cyber Five, 29 percent of orders arrived with a discount code attached, according to Signifyd. That was up from 24 percent last year. The figure peaked on Sunday of the long Thanksgiving weekend, when consumers placed 32 percent of their orders with discount codes.

Lower Prices Pushed Sales in Gift Categories Higher in November

Those lower prices had value-conscious shoppers buying across a range of retail categories associated with gift giving. Sales in the alcohol vertical were up 30 percent year-over-year in November, according to Signifyd data. Luxury goods were up 11 percent, leisure and outdoor products increased 9 percent, beauty and cosmetics rose 8 percent, apparel increased 7 percent, and home goods were up 5 percent. Even the electronics category, which struggled during the Cyber Five, finished up 4 percent in November compared to last year.

Source: Signifyd Holiday Season Pulse Tracker

November’s numbers were undeniably good news for merchants that entered the season wondering how much inflation would be a drag on holiday spending. They have their answer for November.

As we move into the final weeks of the holiday shopping season, time will tell whether the strong sales will continue or whether consumers have tapped themselves out for holiday 2023 no matter how good a deal they can get.

Mike Cassidy is head of storytelling at Signifyd, a commerce protection provider.