Last-minute bargain hunters send holiday retail sales higher than last year, Mastercard says By Reuters

By Savyata Mishra and Siddharth Cavale

(Reuters) -Price-conscious holiday shoppers opened their wallets for last-minute online discounts on clothing and stocking stuffers, potentially benefiting retailers that also offered such convenient options as free delivery and curbside pickup.

The popularity of online shopping has surged due to its convenience, similar or lower prices than in-store, the availability of services like “buy online, pick up in-store (BOPIS)” and fast, free deliveries, said Michael Schulman, a retail expert at Running Point Capital Advisors.

“The shortened holidays season this year compared to last year, with a tighter scrunch between Thanksgiving and Christmas, also left less time for in-store retail shopping and probably incentivized more phone and computer browsing and purchases,” he said.

While there were deals aplenty, retailers appeared to have been disciplined with promotions. Target (NYSE:) and Dollar Tree (NASDAQ:)’s shares were up nearly 3% in noon trading, while Walmart (NYSE:) was flat.

According to a Mastercard (NYSE:) SpendingPulse report, online spending during the holiday shopping period from Nov. 1 to Dec. 24 grew by 6.7% over last year, compared to a 2.9% increase for in-store sales.

This contributed to a total spending increase of 3.8% over 2023, surpassing the previously forecast rise of 3.2% and topping the 3.1% increase during the same period last year.

Steve Sadove, senior adviser to Mastercard and former Saks CEO and chairman, told Reuters that spending rose even when higher prices due to inflation were factored in. He noted that the last five days of the holiday season accounted for 10% of all holiday spending, showing “a lot of strength in the end.”

With just 27 days between Thanksgiving and Christmas — five fewer than last year – retail executives were less exuberant going into the holiday season.

They described their consumers as “selective,” “cautious” and “conservative,” and making “needs-based” purchases. As a result, many retailers doubled down on cutting prices and offering promotions, Bernstein analysts said earlier this month.

Walmart said it would continue to bring down prices through rollbacks, while rival Target said it would increase its promotional intensity as shoppers were not as engaged without promotions. Dollar General (NYSE:) said it expects profits to be pressured from increased promotions in the fourth quarter, while Kroger (NYSE:) and Five Below (NASDAQ:) also said they had to reduce prices to be competitive.

Walmart and Target spent more on ads to reach shoppers on short-video app TikTok and streaming platforms like Peacock and Hulu during the season, highlighting their membership programs that offer quick delivery and BOPIS.

Some of these efforts appear to have worked.

Salesforce (NYSE:) estimated that the number of BOPIS orders could double during the weekend before Christmas, making up nearly 40% of all online orders for retailers. And deliveries are also strong, with FedEx (NYSE:) estimating stronger-than-expected holiday delivery volume last week.

REAL CONSUMER STRENGTH

Huntsville, Alabama-resident Aireale Hobbs, 40, started Christmas shopping for pajama sets, Stanley drink tumblers, and toys for her family online on Black Friday.

She said she chose to do a bulk of her shopping online because of convenience, more options and better deals.

“I got some things from Target that were discounted when using the app,” said Hobbs, who works at as a front desk clerk at a doctor’s office.

Laptops and TVs with new technology, lower prices and growing acceptance of lab-grown diamonds, and athleisure apparel also encouraged shoppers to spend this holiday season, even though promotions were at the same levels as last year, Sadove said.

“Promotions were controlled. Nothing was extra deep and there were no panicked promotions. What we saw was some real consumer strength,” Sadove said, adding that low unemployment and higher wages were buffering personal finances.

Sales in the apparel, jewelry and electronics categories were up 3.6%, 4% and 3.7%, respectively over last year, according to Mastercard. Online sales of apparel, in particular, grew 6.7%, compared to 0.2% in stores.