Black Friday: 'You’re not seeing the very, very deep discounts,' Mastercard advisor explains

Mastercard Sr. Advisor & Saks Chairman Steve Sadove joins Yahoo Finance Live to discuess Black Friday sales.

Video transcript

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- Black Friday, retail sales, despite a resurgence of COVID in parts of the country, holiday cheer is back when it comes to retail therapy. And we have Steve Sadove, Mastercard senior advisor and former Saks chairman and CEO here with us. Thank you so much. And some good numbers to start off with. Sales are up 12.1% compared to a year ago. And online sales are up 4.8% year-over-year. So what do you think? We're off to a good start?

STEVE SADOVE: It looks like consumers are out there shopping. I just came back from the mall about a half hour ago. And the consumers were out there. There were lines in front of the stores. The Mastercard SpendingPulse data, which you're quoting, is as of 10 o'clock this morning. And it's a very healthy number. It's the stores, the brick and mortar stores tracking in the 40% type range. Consumers still on top shopping online as well. I think the numbers are showing that the season is extended. The forecast for the week had been for about a 10% growth on the Thanksgiving week. So, again, the consumer-- this is versus a year ago-- the consumer's back shopping.

Apparel doing very well, the department stores doing extremely well, electronics an outperformer. So what you're seeing in the stores is that the consumers who have been at home over the last year or so, they're back in droves. There's an excitement about getting back in the stores. Yet, the online where it grew 50% last year, is still growing on top of that base. So it really does show that there's a pent-up demand. Mark Cohen in your previous segment was talking about that pent-up savings the consumer has. And you can clearly see it in the consumer behavior.

Steve, I know you and many others have talked a lot about this omnichannel approach that has really taken off during the pandemic. I mean, what's the incentive for shoppers, aside from the excitement that comes with actually going in store after having shopped online, to actually go out into the malls and brave some of the crowds. Are there steeper discounts that we're seeing there?

No, I don't know that it's steeper discounts. The pricing is pretty uniform between the online and the in-store. Sometimes you'll see an occasional differential. But it's more the excitement of getting, touching, feeling, seeing the product, finding something that you're not having a destination to go for a specific item. There's much more of a hunt when you're going into the physical store. You may find something you hadn't even thought of. Online, you know this is what you want. You're not doing as much browsing. But there's a role for each of them.

A lot of customers you're seeing the buy online, pick up in store. Even in the malls today, you're seeing separated areas where there are pickup for the-- you know, cars for parking for the just picking up in the store type of thing. So it's an omnichannel world. And I'm seeing it in the full line malls, in the outlet malls. And the consumer-- you know, the important thing is the consumer is back shopping and feeling quite good about it. I was very surprised by some-- the length of some of the lines. Even though this season has started much earlier, it's an extended season, but the consumer really does want to get out and shop.

- I want to ask you, you know, it seems to be a little bit of a seller's market right now. So how many deals can consumers expect to see when they're out there today and over this weekend? How are retailers being strategic?

STEVE SADOVE: Well, I think that you're in an environment where it it is a little bit of a seller, supply market, driven by supply chain issues. You're seeing Black Friday deals. Everybody has a deal of some kind. You want to drive traffic to the stores. Overall discounting-- and this isn't Mastercard number-- my sense is it's probably 5 to 10 percentage points less promotional than it would have been because-- and much more strategic. Jeff Gennette was on this morning talking earlier on one of the networks talking about how strategic the promotions are at Macy's as opposed to one-size-fits-all. And that's leading to a little bit less promotions. But 20% to 30% is the normal, you know, purchasing is made with that kind of promotion in mind. That's a little bit of almost full priced selling.

You're not seeing the very, very deep discounts that you've seen sometimes in the past. And you do have supply chain issues in terms of availability. You may not find the item that you want. You may have to substitute from one item to another. You still want to buy an apparel item. Apparel is growing in that 50% range. It's a very hot item because of new fashions, as people have been stopping wearing their sweatpants and they want to get out again. So they want newness. But they may not find that exact item that they had in mind. And you're seeing a lot of substitution going on.

- And Steve, we're talking on a day where we're seeing a huge sell-off on the back of these concerns of a new variant. When you talk about this enthusiasm that we're seeing in the malls, in these stores, to what extent do you think that gets dampened by the kind of headlines we're seeing today as well as reports of case counts going up, particularly in the Midwest?

You know, if I look at what's happened over the last year and a half, what you've seen is when you get a hot spot, you tend to see a surge in the online numbers versus the in-store numbers, but not a variation in the total retail sales. So you may find one part of the country or one city where you do see a spike and the in-store component goes down a bit. And you see almost an exact flip in the online. And the total becomes almost the same.

So my expectation is that you may see some swings depending upon an individual hotspot. But the overall health of the consumer continues to be strong. There is a very healthy savings rate. The high end still is-- luxury shoppers are continuing to be out there with a very, very healthy spend level. And I would anticipate that, yes, there may be some variation online to in-store based upon geographic hotspots. But overall, the consumer is tracking well. The Mastercard forecast for the holiday season is right on track, which was in that 7.4% overall retail growth. The numbers through mid-November continue to look very healthy. The Thanksgiving forecast is quite strong. So I would anticipate this is going to be a very healthy holiday season.

Well, Steve, I think you've convinced me to actually go out into stores and maybe seek out some discounts today. Steve Sadove, Mastercard senior--

STEVE SADOVE: May have some lines. I would tell you, the lines are there.

- I mean, I have been shopping online. But I'm curious now. I might go out and do some shopping in person. Steve Sadove, always good to have you on. Mastercard senior advisor and former Saks chairman and CEO.