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As America’s annual shopping frenzy heats up over the Thanksgiving weekend with Black Friday — the sales day that is supposed to add black ink to retailers’ account books — it’s a good time to take stock of America’s love for consumption and what it says about the economy.

A survey conducted for the National Retail Federation, one of the main retail trade groups, found that holiday spending is expected to reach record levels in November and December, growing by 2.5% to 3.5%, with Americans spending $979.5 billion to $989 billion. A record 89% of people between 18 and 24 were expected to shop over the Thanksgiving weekend to take advantage of the famous Black Friday sales.

Weekend Brief spoke with Eric Fisch, head of commercial banking for the retail and apparel industries at HSBC, and Daniela Bretthauer, a retail and consumer analyst for the Americas at HSBC Global Research. The transcript of our conversation has been lightly edited for length and clarity.

Quartz: We’re all conditioned to think of Black Friday as the day that will make or break retailers and the companies that supply them. There’s been a lot of talk about a weakening economy in the post-COVID era. What’s really happening, and how important is Black Friday anyway?

Eric Fisch: Black Friday is interesting as a standalone day from just a human interest perspective. But [the holiday shopping season] started Nov. 6 or 7. What I’m hearing from my clients is to look at November as a month, and it’s definitely up year-over-year for them. This holiday season has been a really unique year. My clients who are wholesalers, retailers, in apparel and discretionary spending came into this year very defensively. They were concerned about consumer behavior, so they bought lighter — nearly every company in my portfolio has less inventory — they used promotions very strategically, to avoid any big misses and big markdowns, And they took a very guarded approach to marketing. With the election, billions of dollars were pouring into advertising and social media, and that was crowding out ads for product, and also raising the prices of those ads. Once that was over, my clients poured money into ads, and the consumer was primed to shop and they jumped on these discounts. So I’m expecting a better-than-anticipated holiday, which will cap a better-than-expected year for retail, and a consumer who remains pretty resilient.

Daniela Bretthauer: The economy is getting back to normal. I think people’s sentiment is that they’ve done all the travel, they’ve had the experiences, and after the [COVID] push forward, there was the hangover, so now I would say things are getting back to normal. Now we’re more selective, but we’re not gonna go out and spend like there’s no tomorrow.

Quartz: What do we know about who’s shopping where?

Daniela Bretthauer: This is very interesting. The average income of Dollar General customers is, about $40,000 per household versus $65,000 for Target versus $100,000 for Walmart versus $125,000 for Costco. So those big box stores are more high income, whereas Dollar General is really low income. The people that benefited from the SNAP program like the food vouchers. ANd the categories that people are shifting into, like after Covid, people are looking more into their health. So vitamins and supplements, which are high-margin items, and you know Walmart is getting big in pharmacy.

Eric Fisch: We’re seeing a lot of strengths and categories that have been strong for the past few years. So athleisure continues to be incredibly strong. If you think about what’s happened to the American wardrobe, workwear has casualized, right? So a nice pair of denim for large portions of the country,that’s work wear. And so that means that your weekend and evening wear has turned to athleisure. It’s not just you buy one, it’s now you have a wardrobe of it, and the brands have realized this, and all of those athleisure brands have really made it into a lifestyle suite of products: for different purposes, different levels of fashion. So that’s why denim has been very strong. Denim desperately needs changes in trends. And so last year, we finally got a new trend, where it went from skinny to a looser, lighter gage denim, this flowy kind of a product, and that’s that’s fantastic for for denim.

Casual footwear has been just phenomenal, with comfort as a primary driver. Chunky and ugly is cool and so major sneaker brands are losing market share to some of those others. Anytime you have a shift in consumer taste all of a sudden, a category performs really well. But the surprising one is men’s suiting. People go to weddings. People are dressing up when appropriate. And so we’re seeing a resurgence in that category as well.

Quartz: The big box retailers often take a haircut on margins this time of year, and make it up on volume. But it sounds like margins are strong this time. What’s different?

Eric Fisch: My clients gave us expectations that were flat, or maybe up low single digits in terms of performance, but with very strong margins. So why were the margins so strong? Because they expected to sell a lot more [merchandise] at full price, because they weren’t taking a lot of risk on [building up] inventory. And so that’s really proven itself out. [even as] the consumer has continued to shop, albeit at a more circumspect pace. Big Box retailers reported very strong back-to-school [sales], and several have already indicated a very strong holiday season starting. That speaks to the resilience of that U.S. consumer.

Quartz: The two big retailers everyone is looking at this time of year are Walmart and Target. They reported earnings last week, and told two very different tales; Walmart was up, and Target was down. What does that mean for the retail business and the economy? Is there still room for both of them in the consumer universe?

Daniela Bretthauer: I don’t think this is a winner-takes-all market. It’s not like one retailer’s gain is the other’s loss. What’s happening is that as things normalize, some retailers are lost in terms of their strategy, and I think that’s the case for Target. They got lost because there were really strong sales during Covid, Then, when there was this post-spending hangover they didn’t know how to address the issue. If you have the strategy and you have the leadership team in place, what you need to do is execute it. [For Target], one of the reasons for their [lower sales] is the sales mix. They’re more discretionary compared to Walmart or Kroger. But also, Target is the most digital of all the big box retailers., with about 20% of sales coming from digital. But they only use the back room of their stores for digital fulfillment. Walmart uses an Amazon-like warehouse system. But overall, if you have good promotion, then people are buying. Yes, consumers are still looking for value and being very cautious about their budget, but there’s no problem with the health of the U.S. consumer.

Quartz: What’s happening in Luxury goods? Is Black Friday a big deal for them?

Eric Fisch: That’s the one exception [this year]. Luxury is coming off some phenomenal years, and all the luxury brands have steadily increased their prices, and that’s been intentional, so they’ve essentially weeded out the aspirational shopper because of how expensive the product is. The aspirational shopper gets priced out, which means the brand becomes more scarce, which means it becomes more desirable. So I think we’re in this cycle where, if people are priced out, as they return, we’ll see those luxury numbers increase again. But I’m seeing the price point below that, designer and contemporary are the beneficiaries of it. That [former luxury] shopper is not sitting at home saving more money. They’ve just found perceived value in the price point below, and they’re shopping more in that category. Whatever luxury brand you’re in, you want to maintain the scarcity, the attractiveness, the illusion around your brand, and so you’ll take a down year in order to not dilute the brand. You could go into a discount retailer, and there are bins with [low-end] designer-brand bags. That doesn’t make someone else want to buy the [high-end] bags for $450 at a department store. So, if you trade scarcity for revenue, you’re going to eventually have a problem.

Quartz: There have been some new online retailers lately, out of China - Temu, Shine, and even TikTok Shop. Are they a threat to existing retailers?

Daniela Bretthauer: They’ve been growing very fast, but the average ticket is very low. But on what we call the long-tail items, they are very competitive. That’s the accessories, like phone cords, phone chargers, and gadgets, but they are not a threat to Amazon.

— Peter S. Green, Contributing Editor

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Beyond Black Friday