With the holiday season on the near horizon, it’s crunch time for people across the globe to find the best deals on presents, especially those that aren’t usually affected by seasonal sales. This past weekend and subsequent “Cyber Monday” marks the annual event of the consumer discretionary sector marking down retail goods, offering exceptional savings for a very limited time. Generally, a jolt in sales due to Black Friday is expected to be a harbinger of a relatively healthier Q4 earnings report, especially if previous periods had stagnant growth or lackluster earnings. The holiday shopping season is vital to the fiscal success of many retailers and yet historically, sales during this time of year don’t follow any particular pattern or have any distinctly profound impact on overall economic trends. But for many, Black Friday is a time of year that can make or break a company’s financial statements.
This past year, Black Friday sales were particularly successful for certain tech and automotive companies, but for many other retailers they just exposed the level of poor financial health. Automakers have been positively affected by the combination of cheap gas and low financing costs, both of which led to a 1.4% increase in comparison to previous years’ Black Fridays. As great as it sounds, this occurrence was due to the nature of the crude oil commodity in the past year; consumers are far less likely to purchase vehicles if they don’t have reason to feel optimistic about gas prices.
History indicates that a reverse trend usually occurs following periods of stagnant capital growth. Ideally, this should be the case for struggling retailers. Spending during the Black Friday period peaked in 2012 and has fallen each year since. This is a trend that transpired as retailers have begun sales and deals earlier each year with increasingly longer store hours. A huge part of this is because of companies offering Cyber Monday as an alternative to in store shopping, with effectively the same exact savings and range of products. While holiday spending was predicted to fall 11.3% last year, it rose 4.1% thanks to the rising prominence of Cyber Week shopping.
But what about Black Friday’s effect on larger economic trends? Economist Jim O’Sullivan claims, “In general, we believe the importance of the holiday shopping season for overall economic trends is greatly exaggerated.” Most agree with O’Sullivan, largely because retailers are becoming less susceptible to either benefit or loss incurred by an increasingly diluted Black Friday. However, depending on retailers’ success with hitting targets from holiday revenue could be a determining factor in the Fed’s long-awaited rate hike, as consumer spending accounts for two-thirds of U.S. economic output.
Black Friday has been such an integral part of consumer spending, especially since the turn of the century. Retailers are adamant that the one-time event has a substantial impact on their business, while others have taken a stand against the rampant consumerism and shut down their stores last Friday. With the evolution of online shopping and accessibility provided by Cyber Monday, the days of early morning shopping frenzy might just be coming to an end.