Black Friday to the rescue — but at what cost? | FT Alphaville

Black Friday to the rescue — but at what cost?

US equity markets are nearly as excited about Black Friday as these shoppers:

Retail surveys all point to above-expectations spending over the so-called “first weekend of the Holidays”, which begins with Black Friday, when US citizens commemorate the first day they paid Native Americans for goods with a credit card.

(Or something like that.)

Citigroup’s retail analyst Deborah Weinswig has looked at the numbers and says they “point to the strongest Black Friday results in years”. The National Retail Federation estimated that consumers spent $52.4bn over the weekend — up 16.4 per cent from 2010.  ShopperTrak, a research firm, estimates that Friday sales were up 6.6 per cent over the same day last year, making it the greatest dollar amount ever spent during the day.

As in the previous five years, male shoppers outspent female shoppers. This Black Friday, though, the difference was much wider, as the chart below shows. “Retailers late night openings appealed to more males and young couples”, Weinswig writes.

In case you missed it, today is “Cyber-Monday”, when online retailers big up their special deals to attract shoppers too scared to venture in to department stores.

Again, Weinswig has some interesting numbers.

— According to the IBM Coremetrics Benchmark, U.S. shoppers took advantage of early sales this Holiday driving a +39.3% increase in online Thanksgiving Day spending YOY (vs. 3%LY). In addition, IBM found that online sales grew +24.3% on Black Friday YOY (vs. 15.9% LY).

— NRF: Interestingly, shoppers also checked out retailers’ deals online, spending an average of $150.53 on the web, which was equal to 37.8% of their total weekend spending.

— Based on the survey results, 25.7% of Americans with tablet devices did or will purchase items with their devices, while another 37.4% will or have researched products and compared prices with their tablets. Overall, more than half (57.1%) of consumers said they have or will use their tablet devices to shop for gifts this Black Friday weekend.

So, should we add a record-breaking Black Friday to the list of relatively good news stories for the US economy?

Perhaps — but it’s worth being aware of a few caveats:

1. Increased spending was encouraged by longer opening hours. Thousands of stores opened on Thanksgiving evening or midnight rather than the equally ridiculous but traditional 5am or 6am. This suggests that holiday spending may have been brought forward rather than increased in the aggregate.

2. Consumers have told surveys they planned to shop earlier this year. Further to the above, consumers surveys (which should always be viewed sceptically) suggest that Americans were planning to spend more of their holiday dollars than usual over the Black Friday weekend. Here are the results from a survey conducted last month by Citigroup:

3. Consumer spending rose as disposable income fell in the last quarter. Although aggregate consumer debt fell in the last quarter, figures also suggest that some consumers are using savings to pay for shopping sprees. In their Monday email RBS strategists celebrate the Black Friday figures but sensibly worry that without an improvement in employment, glee will be short-lived.

Our concern when it comes to the current rate of consumption remains the divergence between income and spending – the former falling (real disposable income) y/y annualized and the second rising (see today’s charts). At this point the drop in the savings rate (currently ~3.5% from 5% in June) due to this is well covered – but we continue to ask: how long will over-leveraged consumers draw down savings?

All in all, then, we should be wary of Black Friday results. Indeed, it’s worth asking whether the ever quickening annual arms race has gone too far. This blogger is all for letting people pick up a 80-inch TV screen so they can digest turkey in a cinematic slumber, but can’t that wait a few hours? Thanksgiving — for all its dubious origins — is a unique occasion, personal and universal. It’s pretty much the one day of the year that all Americans can enjoy the company of friends and family. Shouldn’t that matter more than playing wacky races with shopping carts at a Target in the dead of night?

Related links:
U.S. holiday weekend sales surge, Best Buy a winner – Reuters
How to End the Black Friday Madness – New York Times
Not So Good – Financial Armageddon