What You Need To Know
Mastercard's SpendingPulse report highlights a 2.5% increase in U.S. retail sales on Black Friday compared to last year, excluding automotive sales. This growth, however, falls short of the 3.7% growth anticipated for the holiday season from November 1 to December 24. Black Friday, the day after Thanksgiving, traditionally marks a surge in retail sales.
Meanwhile, e-commerce sales on Black Friday rose by 8.5%, showcasing a strong preference for online shopping, with in-store sales seeing a modest 1.1% increase. U.S. online spending reached $9.8 billion, aligning with Adobe Analytics' predictions. This growth signifies a consumer base more inclined to spend than in 2022, possibly influenced by the high costs of essentials like gas and food last year.
The increase in mobile shopping, amounting to $5.3 billion of online sales, suggests a trend towards impulsive buying, facilitated by influencers and social media marketing. Despite this, consumers remain budget-conscious, evident in the 47% increase in sales using 'Buy Now, Pay Later' options, reaching $79 million.
Popular Black Friday items included electronics, toys, and gaming products, with sales directly linked to the magnitude of discounts. Conversely, home-repair tools saw less interest.
Adobe's data, based on a trillion visits to U.S. retail websites and tracking 100 million items across 18 categories, does not include physical store transactions. Mastercard's analysis also noted a significant online sales growth of over 8%, compared to just over 1% for in-store sales.
Retailers, aware of the trend towards deal-seeking, are increasing discounts and offering limited-time promotions to attract consumers. Adobe predicts strong online spending through Cyber Monday, anticipating a record $12 billion in sales, but expects a decline in growth post-Cyber Monday due to diminishing discounts.
This spending pattern, characterized by strategic discount hunting and a preference for online shopping, reflects a shift in consumer behavior and the evolving landscape of retail sales in the U.S.
Why This Is Important for Retail Investors
Insight into Consumer Behavior: The trends and patterns observed during Black Friday, such as the growth in e-commerce and the popularity of 'Buy Now, Pay Later' options, provide retail investors with valuable insights into changing consumer behaviors. Understanding these shifts helps investors make more informed decisions about investing in retail companies, particularly those with a strong online presence or those adapting to new consumer spending habits.
Indicator of Economic Health: Black Friday sales figures can serve as an indicator of the broader economic health and consumer confidence. A rise in spending, especially in discretionary categories like electronics and toys, suggests that consumers are willing to spend despite potential economic uncertainties. This information is crucial for retail investors in assessing the stability and future growth prospects of their investments.
Performance Benchmark for Retail Sector: The Black Friday period is a critical performance benchmark for the retail sector. Strong sales during this time can significantly impact the annual revenues of retailers. Retail investors can use this data to gauge the performance and health of retail companies, influencing decisions on where to allocate their investments within the sector.
Adaptation to Shopping Trends: The increase in online and mobile shopping reflects a shift in consumer shopping preferences. Retail investors need to understand these trends to evaluate how well companies are adapting to changing market dynamics. Companies that effectively leverage e-commerce and digital marketing strategies may offer more promising investment opportunities.
Predictor of Holiday Season Performance: Black Friday sales are often a predictor of the overall performance of the retail sector during the entire holiday season. Strong sales during this period can signal a robust holiday season, which is crucial for the retail industry. Retail investors can use this data to anticipate end-of-year financial results of retail companies, guiding investment strategies and expectations for short-term stock performance.
How Can You Use This Information?
Here are some of the investing ideas that can be explored using this information:
Value Investing
The data might reveal certain retail segments underperforming during the Black Friday period. Value investors can look for well-established companies in these sectors that are currently undervalued but have the potential for long-term growth.
Value investing searches for undervalued companies that trade for less than their intrinsic values, with the expectation that they will eventually be recognized by the market.
Growth Investing
Companies that show strong online sales growth, particularly those harnessing mobile and social media for retail, present growth investing opportunities. These companies are adapting to changing consumer behaviors and could offer sustainable growth.
Investing in companies that are leading in technological innovations in retail, like advanced payment systems, AI-driven customer experience, and supply chain optimization, could potentially present a fruitful growth strategy.
Growth investing focuses on stocks of companies expected to grow at an above-average rate compared to other stocks in the market; learn more in our article titled 'What is Growth Investing?'.
Momentum Investing
Investors can focus on retail companies that showed significant sales growth during Black Friday, particularly those outperforming market expectations. Momentum investors can capitalize on the short-term stock price movements of these companies.
Momentum investing rides the wave of existing market trends by buying assets that have shown an upward price trend and selling those in a downtrend.
Dividend Investing
Larger, well-established retail companies that showed steady performance and have a history of paying dividends could be attractive for dividend investors. These companies might not have the highest growth but offer stability and regular income.
Dividend investing targets companies that regularly distribute a portion of their earnings to shareholders as dividends.
Read What Others Are Saying
Reuters: US Black Friday sales rise 2.5%, Mastercard Spendingpulse says
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Relevant ETFs
Some investors prefer to invest in stocks via an exchange-traded fund for ease and reduced risk. Some popular ETFs include the following:
Large-Caps: Vanguard Mega Cap ETF (MGC)
Mid-Caps: Vanguard Mid-Cap ETF (VO)
Small-Caps: Vanguard Small-Cap ETF (VB)
Growth: iShares Core S&P U.S. Growth ETF (IUSG)
Value: iShares Core S&P US Value ETF (IUSV)
Emerging Markets: Vanguard FTSE Emerging Markets ETF (VWO)
Developed Markets: Vanguard FTSE Developed Markets ETF (VEA)