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Black Friday, Cyber Monday, Consumers, and Retailers

When it comes to spending, Black Friday and Cyber Monday kick off the start of the retail spending extravaganza. Many retailers, including e-commerce, depend heavily on the sales generated. To many, the outcome of this brief period can either make or break the retailers.


What is Black Friday?


According to History.com, in the early 1960s, the Philadelphia police complained about the motorists and pedestrians clogging the streets as they move toward the Army-Navy football game, and looking for deals to post-Thanksgiving, coined the day as Black Friday. Since then, the term marked the start of the Christmas shopping season. Black also refers to retail stores moving from the red or red ink denoting losses to the black or black ink for profits when accounting occurred by hand.


Why is Black Friday so popular?


Millions of shoppers tend to do serious shopping on Black Friday. It is one of the pivotal shopping days of the year, falling between November 23 and November 29. Although it is not an official federal holiday, many employees take off work and wait in long lines to enter the retail stores to get the deals.


Covid-19 pandemic and the shift toward online shopping


Covid-19 pandemic in 2020 dramatically changed shopping forever. Because of the lockdowns, consumers turned to shop online. The preference for online shopping exploded and became the dominant form of shopping for the season. Covid-19 all but ended the in-store shopping during Thanksgiving last year as most retailers closed for the day.


What is Cyber Monday?


The term describes the popularity of online sales that occur on the Monday after Thanksgiving. It is the online counterpart to Black Friday, which tends to involve brick-and-mortar retail stores. Recently, Cyber Monday has become as popular as Black Friday due to the popularity of smartphones and the proliferation of the internet. Cyber Monday is famous for its low prices on tech-related products such as laptops, gaming consoles, software games, TV, electronics, cell phones, cameras, etc.

Black Friday shopping and spending statistics


It was a big weekend for retailers last year. Black Friday and Cyber Monday tend to exchange leadership roles over the years. In 2020, from Thanksgiving through Cyber Monday drew 186.5 million U.S. shoppers.


2020 was a record year for online shopping as it drew 100 million consumers to shop online. U.S. shoppers spent a record $34.36 billion in retail websites over the five-day window from Thanksgiving Day to Cyber Monday, up from $28.49 billion for the same period last year. Shoppers spent an average of $311.75 on holiday purchases. On Black Friday, online spending by consumers in the U.S. for 2020 resulted in $6.3 million per minute or an average of $27.50 per person.


Cyber Monday sales eclipsed Black Friday last year. However, Cyber Monday digital sales slowed to just 15.1% year over year. Nonetheless, the single-day event generated revenues of $10.84 billion, up from $9.42 billion in 2019. Black Friday gained ground to Cyber Monday, increasing 21.6% to $9.03 in online sales from $7.43 billion from the prior year.


Consumer Spending, Confidence, and the U.S. Economy


While Black Friday and Cyber Monday are two separate shopping events, the lines separating the two are difficult to tell due to the popularity of online shopping and the shift toward technology-related products. As the digital landscape change, e-commerce retailers are adjusting to consumer trends and needs. More retailers and e-commerce are rolling out Black Friday deals as early as late October and pushing up their Cyber Monday sales earlier each year.


Whether consumers choose to shop on Black Friday or Cyber Monday can impact the sales and revenues of brick-and-mortar retailers and e-commerce companies. Since consumer spending is 70% of the U.S. GDP, the sales and revenues reported during the Black Friday and Cyber Monday sales can give early clues to the health and sentiments of consumers heading into Christmas.


SPDR S&P Retail ETF (XRT)


We recommend investors and traders closely monitor the SPDR S&P Retail ETF (XRT – 103.07) in the weeks ahead as this is the largest pure-play on the retail market. As of 11/12/21, XRT is the largest retail sector ETF, with a market cap of $1.134 billion and $1.19 billion in assets under management. XRT is holding near highs as it recently broke out of its 2021 trading range above 98.35-98.74 earlier in the month. It suggests that although some retail companies continue to struggle, they are performing well ahead of the crucial Black Friday, Cyber Monday to Christmas period.


The ability of XRT to maintain above its prior breakout on last week's decline to a low at $99.80 is also constructive. Watch for XRT to hold onto the high-90s support and preferably stay above the 11/9/21 high at $102.84. If momentum continues into the end of the week, it is reasonable to expect XRT to continue to rally toward 109.84 before the end of the year. As noted, a healthy consumer translates to a firmer economy and bodes well for the ongoing stock market bull rally.


Source: Courtesy of StockCharts.com

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