We are bombarded with “special deals,” “doorbusters,” price cuts, and early store opening hours on Black Friday. And we’re urged to do our technology shopping on Cyber Monday. Afterwards, we see news reports of the overall retail sales results as an indicator of the stock market for the rest of the year. But how important are these sales numbers and do they really dictate market direction?
Black Friday and Cyber Monday
“Black Friday,” in retail lingo, is the Friday after Thanksgiving and is typically the largest shopping day of the year. The term originated with Philadelphia police officers in the 1950s, who began using the phrase to describe the day where a mass of shoppers crowded the sidewalks and caused traffic jams on the day after Thanksgiving. The term also refers to the shopping day that puts retailers “in the black,” or making a profit in their accounting tables.
“Cyber Monday,” on the other hand, is a more recent phenomenon. On the Monday after Thanksgiving, retailers typically augment their Black Friday deals
with large online promotions.
Sales Results for 2016 Set Records
According to Adobe, more than $5 billion ($5.27 billion) was spent online by the end of Black Friday in 2016,
a 17.7% increase year-over-year. In addition, Adobe reports that Black Friday set a new record by surpassing the $3 billion-dollar mark for the first time at $3.34 billion – which was a 21.6% growth year-over-year (Thanksgiving Day accounted for the remaining $1.93 billion).
Even more interesting is the fact that Black Friday 2016 was the first day in retail history to see over $1 billion in mobile revenue, which was a whopping 33% increase from the previous year.
More interesting data from Adobe:
- The five best-selling toys were: Lego Creator Sets, Electric scooters from Razor, Nerf Guns, DJI Phantom Drones and Barbie Dreamhouse.
- The five top-selling electronic products were Apple iPads, Samsung 4k TVs, Apple MacBook Air, LG TVs and Microsoft Xbox.
Black Friday 2017 Could be Huge
According to RetailmeNot’s survey data, consumer spending over the Black Friday 2017 weekend is expected to increase by 47% from the same period in 2016. RetailMeNot reports that consumers plan to spend an average of $743 this year – up from an average of $505 over the same weekend last year.
The survey data further reports that almost 70% of consumers will shop over the Black Friday holiday weekend this year.
Cyber Monday is Bigger Than Black Friday When It Comes to Online Sales
Over the past few years, “Cyber Monday” has grown in popularity and is now even bigger in terms of online sales vs. Black Friday. In fact, last year, Cyber Monday was the largest online sales day in history, with shoppers spending a record $3.39 billion online on Cyber Monday 2016, up 10.2% from the previous year. And this year, more than 56% of consumers surveyed by RetailMeNot said they plan to make a purchase online on Cyber Monday 2017 – up from 39%
Effects on the Stock Market
So, what do the Black Friday and Cyber Monday sales results mean for the overall economy and stock market? Well, investors tend to see Black Friday and Cyber Monday sales results as the first indication of a profitable or unprofitable shopping season. Investors then apply these indications to the stock market, as predictions of whether the market will be stronger or weaker during the final months of the year.
Due to these investor reactions, the market will often rise on the days following Black Friday, if retailers do better than expected. If sales are down, however, then the market often falls. However, both of these effects tend to be short-lived.
One analysis studied stock market results of the past 100 years, including the years since the beginning of the Black Friday phenomenon. The results indicated that the initial up or down reactions by the market to Black Friday sales did not correlate with the market’s performance the rest of the year at all.
Another analysis discovered a different relationship – one that makes intuitive sense: stock market performance in October and November tends to predict sales results during the holiday season. So, if the stock market performs well in October and November, then consumers might feel more confident and willing to spend. Seems logical.
It is important to remember that Black Friday and Cyber Monday form just part of the retail sales year, and retail sales in general are just a part, albeit significant, of macroeconomic conditions.
That being said, it is tempting to put a lot of faith in these sales results, as consumer spending does account for almost 70% of our GDP. But it is more important not to overreact to Black Friday and Cyber Monday results because while they might have short-term implications for the markets, the longer-term effects are unclear.
When you have a chance, let me know whether you prefer to shop on Black Friday or Cyber Monday or if neither really factors into your shopping plans. And in case you’re wondering, I will be eating leftover turkey.