Nevermind that so many retailers have their Christmas decorations out and for sale sometime around Halloween (or even earlier!)
Things don’t start heating up until the day after Thanksgiving.
The day that has infamously become known as “Black Friday.”
The shopping version of the day started back in the 80s. In theory it’s the day retailers went from “in the red” to profitably “in the black.” And to kick off the holiday shopping season, they offered some of the most irresistible deals ever.
Sometimes opening in the middle of the night, retailers would open their doors to “hordes” (and we do not use that word hyperbolically) of bargain hunters stampeding in to get their hands on one of the limited number of big screen TVs, or computers, or gaming consoles…
It made for some riveting images over the years…
With the ascendency of Amazon, online shopping began to steal some of Black Friday’s thunder and Cyber Monday was born.
The span between the two days has become a critical barometer for how the larger shopping season will go. And ultimately how retailers will perform during what’s become a really critical season for profits.
This year may be even more telling.
Predictions of a Booming Season
Management consultancy Bain & Company has prepared some predictions for this year’s holiday shopping extravaganza. First the good news…
Retailers can expect another doorbuster Black Friday–to–Cyber Monday shopping period. Bain forecasts US retail sales will reach $75 billion for the first time ever, growing by about 5% year over year and outpacing our total holiday season forecast of 3%. What’s more, around 8% of Bain-defined holiday sales will come between Black Friday and Cyber Monday this year—the highest share since 2019. This underscores the enduring importance of this key shopping weekend.
Further, they anticipate that 8% of all holiday sales will be made during that weekend.
A big kickoff to the shopping season is a key signal for retailers. Over the past three years, Black Friday has ranked either first or second in terms of sales made over the period. (Over the past two years, Cyber Monday has dropped out of the top-7 sales rankings.)
A softer start to the season would not bode well for retailers and increase pressure to boost sales during the 2-3 days before Christmas — another popular shopping window.
Still the initial outlook is bright.
Something Else to Watch…
We hate to be a total Grinch during this festive season, but the actual consumer is something else we need to watch. Simply because they’re spending in record amounts, shouldn’t be interpreted as a booming consumer sector.
Financial website NerdWallet recently published its holiday spending report. Right in line with the Bain report, their feedback has been positive.
The holiday season is nearly here and with it, ample opportunity to spend big. According to a new NerdWallet analysis, Americans plan to spend about $17 billion more on gifts and about $46 billion more on flights and hotels this holiday season than they did last year.
Unfortunately, what this survey doesn’t tell us is whether shoppers plan to buy more things or just anticipate paying higher prices. Or some combination of both. Still, more money spent is generally good for the retail sector.
One thing the study does indicate is how consumers are paying for all their holiday joy.
Most shoppers plan to use credit cards again for this year’s holiday shopping: Nearly three-quarters of 2024 holiday shoppers (74%) say they’ll put at least some of their holiday gift purchases on a credit card.
More and more shoppers are relying on credit to make purchases.
And while some shoppers use their plastic to earn some type of reward, suggested by the number of shoppers who quickly pay off their balances…
Of Americans who put 2023 holiday gift purchases on a credit card, less than a third (31%) paid it off with the first statement.
…Others use them out of necessity evidenced by lingering balances:
The survey found that nearly 3 in 10 Americans who used credit cards to pay for holiday gifts last year (28%) still haven’t paid off their balances. Likewise, the same proportion (28%) of 2023 holiday travelers who put flights and hotel stays on a credit card still haven’t paid off the balances.
We’ve been writing about the struggles of the average consumer and how it’s been showing up in the retail sector. Certain retailers (Walmart, Costco…) are booming while others (Target, Kohls, and most dollar stores…) have been getting the cold shoulder from consumers.
Retailer’s earnings fate in the coming quarter will depend largely on how holiday sales go.
The economy, on the other hand, is far more dependent on the fate of the consumer…
