Holiday sales rise more than expected as retailers cut prices

Holiday shoppers opened their wallets at the last minute in search of bargains on online platforms, making big purchases on clothing, electronics and jewelry, a sign that household finances remain healthy.

Spending during the holiday shopping period from November 1 to December 24 increased 3.8% from 2023, according to a report from Mastercard SendingPulse, up from a previously forecast increase of 3.2% and exceeding the increase of 3.1% over the same period last year.

“The consumer is in good health. Unemployment is low. Wages are increasing. Their personal finances are reflected in the fact that they shop,” Steve Sadove, a senior adviser to Mastercard and former CEO and chairman of Saks, told Reuters.

As the holiday season approached, many US retailers described their consumers as “selective”, “cautious” and “conservative” and making purchases “based on need”. As a result, many have stepped up efforts to lower prices and offer promotions, Bernstein analysts said earlier this month.

Walmart, for example, said it would continue to drive down prices by cutting prices, while rival Target said it would increase the intensity of its promotions because shoppers would not be as engaged without promotions.

Dollar General said it expects its profits to be hurt by increased promotions in the fourth quarter, while Kroger and Five Below also said they had to cut prices to compete.

Retailers have experimented with generative AI for customer service and product search and attempted to improve curbside pickup and delivery services while striving to provide a seamless shopping experience.

Although the level of promotions remained in line with last year, Sadove noted, the introduction of improved televisions and laptops, increasing acceptance and falling prices of synthetic diamonds and continued demand sportswear brands have all encouraged shoppers to open their wallets.

That pushed sales in the clothing, jewelry and electronics categories up 3.6%, 4% and 3.7%, respectively, compared to last year, according to Mastercard.

Online clothing sales, in particular, increased 6.7%, compared to 0.7% in stores, as shoppers searched for deals on multiple websites.

Mastercard SendingPulse measures in-store and online retail sales for all forms of payment. Data excludes auto sales and is not adjusted for inflation.