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Credit card data released by Earnest last week offered a sobering look at how the holiday shopping season has gone so far. Consumers spent 1.4 percent less at major US retailers in the first half of November compared to the same period a year earlier, the first such decline recorded in data going back to 2017.
Earnest offered a few potential explanations: it’s possible that retailers are saving their best promotions for later in the season, as the shipping delays of the pandemic fade into memory. Amazon also ran a Prime Day sale in October, perhaps pulling some holiday shopping forward.
But the primary cause is the rapid rise of Shein, Temu and TikTok Shop. Their sales now draw stampedes of shoppers looking for holiday deals just like malls once did. In the Earnest data, Shein’s sales rose 16 percent in the first half of November, while Temu’s were up 18 percent (TikTok Shop’s sales more than tripled, though the platform was brand-new last year). Amazon’s were flat, likely because of that Prime Day sale. Its Temu competitor, Amazon Haul, launched last week.
These sort of general e-commerce merchants now swallow 21 percent of holiday sales, double their share in 2016, according to Earnest. Offline it’s much the same story; in recent earnings calls, off-price retailers including T.J. Maxx, as well as bargain-priced Walmart, are among the few companies offering rosy outlooks for the holidays.
This puts many clothing brands in a bind, and raises the stakes for Black Friday, which remains one of the biggest spending days on the calendar, with US shoppers shelling out $9.8 billion last year according to Adobe Analytics. Retailers can offer deep discounts to try to win back customers, but how effective is that going to be when Temu sells lookalikes at impossibly low prices? And retailers would pay a steep price for trying to keep pace with their online competitors, as consumers won’t stop demanding deals just because it’s January.
A few brands are managing to hold their own this holiday season. Abercrombie & Fitch was one of just two full-price fashion retailers to see an uptick in sales in the period Earnest covered, indicating it still has its pulse on what young shoppers want. Victoria’s Secret was the other, a strong signal that it’s October fashion show was a success.
The other retailer to watch is Gap. In the Earnest data, sales were down 6 percent from November 2023. However, on Thursday, the company reported strong third-quarter results, and said it’s just ramping up for a big holiday season. It thinks it has a winning strategy in focusing marketing and in-store merchandising around new colours and styles for basics, as well as items made from CashSoft, a cotton-polyester blend meant to feel like cashmere. Fabric innovation and quality are two areas where a traditional retailer can still differentiate themselves from Shein and Temu, even among budget-minded shoppers.
Gap is selling CashSoft cable-knit sweaters for under $50, well within the range of Temu’s cashmere knitwear. This won’t win over shoppers for whom rolling the dice on Temu cashmere as part of a massive haul is part of the fun. But for everyone else, it just might work.
The Week Ahead wants to hear from you! Send tips, suggestions, complaints and compliments to brian.baskin@businessoffashion.com.
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