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Mixed economic messages as consumers head into Black Friday

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Adam Allington

Black Friday shoppers are in for some pleasant surprises this year, as many gifts are cheaper now than they were a year ago, when inflation was still near its 40-year peak. 

Still, U.S. retail sales have been cooling, leading major retails to worry that consumers are starting to pull back on discretionary spending.

Randy Allen

Senior Lecturer

Randy Allen, senior lecturer of management at Cornell University’s SC Johnson College of Business, is an expert in retail and consumer behavior.

Allen says:

“Black Friday will be different this year. Going into the holiday season, consumers are tightening up on their pocketbooks. Inflation, while down is still up, the unemployment rate while low is masking the job losses in consulting, banking, and technology. Many of these jobs are high paying jobs that are gone, or bonuses are going to be down. Recent college graduates are struggling to find jobs and are back to paying student loans.

“I expect all of these to result in less spending this season and on Black Friday. Consumers will not sit out, but they will spend less and more on necessity type items. Retailers are concerned. They have been promoting ‘Black Friday’ deals over the last two weeks. They are trying to capture the consumers spend earlier to be sure they get it.”

Ori Heffetz

professor of applied economics at Cornell University’s SC Johnson College of Business

Ori Heffetz, professor of applied economics at the SC Johnson College of Business, is an expert on consumption and studies the psychological, social and cultural aspects of economic behavior. 

Heffetz says:

“When considering a purchase, consumers first form perceptions on whether something is expensive or cheap, whether it is a good deal or a bad one. To form these perceptions, people may want to compare the current price to some benchmark. For example, to what they expected the price to be this year, or to what they remembered it from last holiday season. A pleasant surprise—a current price below last year’s—can therefore feel attractive, even if it is significantly inflated relative to a few years ago. 

“The bottom line: this year is going to be full of pleasant surprises for consumers, due to recent price declines, even though prices are significantly higher than a few years ago. 

“Just one dramatic example: travel. Looking at the Labor Department’s most recent data (from October this year), airline fares are 13.2 percent cheaper than a year earlier. Last October, airline fares were 36 percent higher than a year earlier. So for those whose benchmark is ‘a year ago,’ traveling last year felt super expensive, but this year it feels like a great deal.”

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