WHAT BLACK FRIDAY AND CYBER MONDAY DON´T TELL YOU ABOUT THE ECONOMY / THE WALL STREET JOURNAL

Economy & Business

What Black Friday and Cyber Monday Don’t Tell You About the Economy

Dec 2, 2014 Dec 2, 2014

By Kathleen Madigan
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Associated Press

Maybe it’s time to stop talking about Black Friday’s importance to year-end shopping.

The idea that holiday sales begin the day after Thanksgiving is no longer the case. The 11% drop in early holiday shopping, estimated by the National Retail Federation, does not mean the U.S. economy is in trouble (and that’s a point the group itself makes).

 

Holiday gift-giving has shifted away from traditional store items. Services such as a spa day or golf lessons are replacing merchandise as holiday gifts. Those indulgences don’t show up in retail sales.

Plus, according to retailers’ data, 80% of consumers plan to give at least one gift card this year, and 17.5% plan to give six or more. While consumers buy the cards before the holidays, retailers do not recognize the revenues until they are used.  That’s why January sales activity has now become part of assessing total holiday sales.

The retail experience around the holidays has changed in recent years for two major reasons.
First, when household spending collapsed in the Great Recession, retailers began to fight for every shopper’s dollar. As a result, retailers roll out “Black Friday” deals well before Thanksgiving–if not before Halloween.

Second, the explosive growth of online retailing means consumers can order gifts anytime everywhere. Online shoppers can even get the same Black Friday discounts offered by brick-and-mortar stores, but without getting up at 4 a.m. to stand in line in the cold. That’s why e-commerce sales have captured a growing share of retail activity in the fourth quarter of each year for more than a decade.

E-commerce marketing analytics firm Custora, which tracks real-time transaction data from more than 100 U.S. retailers, estimates online shopping for the period of Thanksgiving through Cyber Monday surged 15.4% compared with the same period of 2013. That’s an impressive gain.

These are structural changes to how consumers shop—and keep in mind it is total consumer spending, not just gift-giving, that drives economic growth.

That point was highlighted in a research note by Goldman Sachs. Kris Dawsey, a Goldman economist, pointed out the early National Retail Federation estimates do not correlate well with retail sales as tallied by the Commerce Department.  In particular, the numbers don’t jibe with the “control sales group.” This retail category excludes purchases of vehicles, building materials and gasoline and is an input to consumer spending on goods in gross domestic product.

In Goldman’s view, consumers are doing well enough to spread some holiday cheer this year.

“We maintain an optimistic view on consumer spending for the final months of the year, fueled by lower gasoline prices and solid job growth,” Mr. Dawsey wrote.