Spending on the day after Thanksgiving and on the weekend after the US Thanksgiving holiday, is always considered an indicator for last quarter retail based business, but the failing state of the US economy made the focus on this year’s numbers even more nervous. The final numbers from across the US retail space will be in, probably tomorrow, but that has not stopped people hinting and looking for clues through the debris left after Black Friday buying hours.
US retailers get as much as 40% of annual sales during the holiday season with the Thanksgiving weekend kicking it off and accounting for around 10% of that, which is why it is so important.
The strongest message perhaps came from the unlikely direction of comScore, focusing on online spending, and giving the good news that perhaps a 1% rise on online spending would somehow point to an up year. Commentators covering the story even forgot that there has been a gradual drift to online spending every quarter for the past 40 quarters, so when comScore said that Black Friday spending was up 1% to $534 Million in E-commerce spending, it should perhaps have been seen as more bad news, not a sign of a reverse.
comScore numbers actually showed that all of November from the 1st to the 28th, was in fact down by 4% on last year with $10.4 billion being spent online, versus $10.8 last year.
This took in all purchases that were not travel costs, and excluded auctions and large corporate purchases. It was the fact that Thanksgiving day was up 6% that perhaps led to the optimism, but there are plenty of ways to read that. Thanksgiving day is a slow day in the US because everyone is having a long lunch with their folks. The best interpretation is perhaps that when families come together they feel a little less isolated and feel that things like recessions are less real and can’t touch them. Whatever the reason one Swallow does not a Summer make and every other piece of data was negative.
‘Early reports suggest that Black Friday sales in retail stores were slightly better than anticipated in this depressed retail climate, and that performance apparently extended to the online channel, which saw sales on Thanksgiving Day and Black Friday combined increase 2 percent versus year ago,’ said comScore chairman, Gian Fulgoni. ‘It’s probable that on Black Friday consumers responded positively to the very aggressive promotions and discounts being offered in retail stores, so it will be important to see how they respond to similarly attractive deals being offered online on Cyber Monday, the traditional kick-off to the online holiday shopping season.’
It may seem parochial, but this Black Friday spending event will ripple around the planet once the numbers are known and trusted. US retailers would breathe a sigh of relief that their offers could trigger spending, and although it might mean that sales offers have to be exceptionally aggressive on key trigger items like flat screen TV sets, and that might squeeze margins, the fact that business is being done would distribute relief around the US finance community, releasing money and lending, an emotion that might then spread around the world.
However if initial reports suggest Black Friday was a hit, but they turn sour and everyone finds out it wasn’t, it would create another tale of woe and ‘I told you so,’ and more belt tightening would ensue, with its global consequences.
The Monday after Thanksgiving, popularly known as ‘Cyber Monday,’ represents the first significant spike in online spending activity for the holiday season. The results from Cyber Monday being the first working day following the Thanksgiving holiday and the fact that purchases from work still account for approximately half of all e-commerce spending.
Interestingly, Cyber Monday has historically been an accurate bellwether for the overall retail performance during the online holiday shopping season. Individual online spending days vary significantly but Cyber Monday is always within a few percentage points of the holiday season growth rate.
‘With so much volatility right now in the variables which influence consumer spending, predicting where this online holiday season will end up has been far more challenging than in previous years,’ added Fulgoni. ‘That said, Cyber Monday may well prove to be an important indicator of whether the decline in spending that we’ve seen during the first few weeks of the online holiday season will continue for the balance of the year.’
But it was Nielsen Online that got the first reports out on Cyber Monday, ahead of comScore, suggesting that because of increased traffic, there was likely to be more spending. The numbers from Nielsen showed that traffic was up 10% over a year ago, and that it was hugely up against a week ago and that 35.9 million unique visitors were visiting retail sites, which in itself was a 13% increase over Black Friday. So far so good, and if the historical figures are borne out and this continues up until Christmas it may show that the US is definitely in recession, but not so bad that it can’t buy Christmas presents.
“The growth in traffic to online retail sites on Cyber Monday was better than many people expected, making retailers hopeful that this growth will carry through the holiday shopping season and drive sales,” said Ken Cassar, vice president, industry insights, Nielsen Online. “The combination of aggressive holiday sales and incentives, such as free shipping, across many of the major retailers is helping drive a large number of consumers online this year.”
However in this recessionary time there is always room for a note of caution and Cassar added, “It remains to be seen if people have done the majority of their shopping on these two big shopping days to save time, or if they are holding out for additional sales and promotions. If history is any indication, we expect that Monday, December 15th will be the peak day for online shopping traffic.”
The hot categories were Beauty products Toys and Videogames, clothing followed by consumer electronics and computer hardware. But visits to web sites is one thing, and spending is another, but it is the amount of the spend that is important, and when that is known there could either be a sigh of relief across the retail sector, or further panic.
eBay was the most visited site with 10.6 million unique visitors, and Amazon and Wal-Mart followed with 9 million and 5.2 million respectively.
But out on the street, where Reuters and other companies placed people in the retail queues, reports were coming in that people expected to spend less and walking traffic was down, almost as if to say that the excitement of shopping was lost in a down market, so we might as well save the time, stay at home and do it all online.
The National Retail Federation, a retail industry trade group, put out a survey saying that spending for the holiday weekend will jump 18% to $41 billion based on what people said they planned to spend. This defied all expectation and most US analysts were saying that it was a freak result, probably due to a weakness in its approach, especially since all the retail chains have been reporting down quarters so far, and asking why would it suddenly turn around like that. What people are looking for is a fall of something small like around 2.5% which would be the type of figures that, although it would confirm that the US remains in recession, it would be a credible figure that was not too bad. Anything else is just not going to be believed and anyway, asking people if they plan to spend more is not the same as counting what they have spent afterwards.
But one or two surveys in the US came up with upwardly moving numbers based on counting the number of people in stores, with a 3% spending rise being predicted by some. Once again, going to the store out of habit is one thing, spending the same amount as last year in another.
However, respected researcher Gallup, interviewing people as they left stores, said that Americans self-reported a spending leap for Black Friday, but said that spending dropped back to more typical levels the following day Saturday.
You can see from the graph above (in PDF version) that this shows that Black Friday could be a one off, more a token ‘feel good’ spend before going back to work and the reality of the economy.
Mostly the frenzy related to Black Friday and Cyber Monday tells us that the US investment community is desperate for any kind of good news, but when it comes, for the most part it remains so convinced of the depth and hopelessness of the recession that it just refuses to take any comfort from the numbers, preferring to wait instead for some more bad news, confirming its cynicism.
It can’t have helped that Sears managed to allow the increased online activity of Black Friday to slow its web site to a crawl. Online researcher Keynote said that across the big 30 online retailers Sears was the one that suffered the most, ruining much of its Black Friday morning traffic.