Consumers dive into retail holiday shopping season
The U.S. retail holiday shopping season – the 61 days in November and December – is in full swing. For American retailers, the holiday season represents, on average, 20 percent of their entire annual sales. In fact, the holiday season can generate nearly 10 times the sales than the industry’s second largest shopping holiday, the back-to-school season.
The holiday season’s biggest shopping days are Black Friday and Cyber Monday. To the uninitiated, Black Friday is the day after Thanksgiving when most Americans begin their Christmas shopping. Cyber Monday, the name given by retailers for the following Monday, encourages consumers to shop online.
For many Americans, Black Friday has become as much an annual tradition as picking out the family Christmas tree. For some, it means waiting in line – potentially for hours before the store even opens – to get the ultimate deal on heavily discounted, yet limited supply, of consumer goods. For others, their Black Friday tradition comes not from actually shopping, but from simply watching the ensuing chaos, and sometime stampedes, among shoppers once the doors are actually open.
Yes, whether at the family dinner table or office water cooler, we’ve all shared or heard stories of Black Friday escapades that, over time, have reached near legendary status. The swearing, pushing, shoving and in some cases fighting, to secure one of the limited quantities of heavily discounted products on sale. In one noted Black Friday incident, a California woman was arrested after she pepper-sprayed fellow shoppers while jockeying for one of the last Xbox video game consoles.
For the financial markets, the focus is less on the antics of a few adrenaline-infused shoppers than it is the American consumer’s impact on the health of the U.S. economy. Economic growth consists of four key components: personal consumption expenditures, business and residential investment, net U.S. imports/exports and governmental purchases. But of these four components, personal consumption expenditures carry the greatest economic impact.
Personal consumption expenditures consist of household purchases of durable and non-durable goods and services such as cars, furniture, food, clothing and education, among others. Imbedded in this list are most of the goods and services that Americans purchase during the retail holiday shopping season. Overall, consumer spending accounts for more than two-thirds of all economic activity in America.
Fortunately, consumer optimism remains extremely high. The Consumer Confidence Index, a key measure of optimism on the state of the U.S. economy, was just reported at 135.7, just below an 18-year high. The index has a benchmark of 100. Anything above 100 indicates optimism on jobs and income by consumers, who ultimately will spend money and stimulate economic growth.
More importantly, initial sales data for this holiday season indicates that American consumers are turning that confidence to conviction at the checkout counter. Based on early estimates, the National Retail Federation, or NRF, expects holiday sales to increase 4.3-4.8 percent from 2017. However, the NRF is noticing a definitive trend in this year’s sales data – a significant increase in online shopping.
According to Adobe Analytics, on Black Friday, online sales were a record $6.22 billion – a 23 percent increase over last year. On Cyber Monday, Americans spent a record $7.9 billion shopping online – a 19.3 percent increase over last year. Amazon, the world’s largest online retailer, announced that this year’s Cyber Monday was the single largest shopping day in its history.
For those of you, like me, who have yet to start their Christmas shopping season, rest assured, there are still plenty of deals to be had. But kindly remember, when you do venture out in the cold and snow to visit your friendly neighborhood retailer…please…leave the pepper spray at home.
Mark M. Grywacheski, Investment Advisor
Opinions expressed herein are subject to change without notice. Any prices or quotations contained herein are indicative only and do not constitute an offer to buy or sell any securities at any given price. Information has been obtained from sources considered reliable, but we do not guarantee that the material presented is accurate or that it provides a complete description of the securities, markets, or developments mentioned.
Quad Cities Investment Group, LLC is a registered investment advisor with the U.S. Securities Exchange Commission.
