As Thanksgiving approaches, so does the retail “holiday” Black Friday.
Over the years, Black Friday has been used as an indicator for the economy’s health… determining if people are actually spending money. And most stores prepare all year for this day, hoping for a decent turnout.
Here’s a brief backstory on Black Friday, if you weren’t entirely sure where this shopping holiday came from or how it was coined “Black Friday.”
The term came to life in the 1960s. The “black” in the holiday’s name represents stores moving from “red” to “black,” referring to their accounting records — red meaning loss and black meaning profit. Black Friday would give stores the opportunity to go from being in the “red” to having a profit before the year ends.
Since then, Black Friday has been stigmatized as being one of the craziest days in retail — filled with early store hours, long lines, and huge discounts.
However, the hype surrounding Black Friday has dwindled a bit, especially with the emergence of hassle-free online shopping and with the recent introduction of Thanksgiving Day as a shopping holiday — getting people into stores a day earlier.
Despite online shopping, retailers continue to spend time and money hoping to entice people to come out to their stores on Black Friday.
One thing they’ve discovered is that they can spread more deals throughout the two months of the holiday season and still reap the benefits. They don’t have to depend on just one day (Black Friday) for the majority of their sales.
Not to mention, they’re able to target the consumers who are turned off by the craziness that’s associated with Black Friday.
What Will This Holiday Season Bring?
Last year’s Black Friday had 74.2 million people shopping. And for this year, we can expect more people shopping and even more money spent.
According to the National Retail Federation (NRF), 2016 holiday sales have the potential to increase by 3.6%, and shoppers are estimated to spend $655.8 billion.
Additionally, the National Retail Federation is projecting that e-commerce will jump from 7% to 10%, bringing in about $117 billion.
National Retail Federation president and CEO Matthew Shay says:
All of the fundamentals are in a good place, giving strength to consumers and leading us to believe that this will be a very positive holiday season… This year hasn’t been perfect, starting with a long summer and unseasonably warm fall, but our forecast reflects the very realistic steady momentum of the economy and industry expectations.
Retailers prepare all year for the holiday season since it’s their busiest time of the year.
According to a survey conducted by the NRF, the average consumer will be spending $935.58 during this year’s holiday season.
The survey also indicated that 6 out of 10 people will be buying items for themselves — spending an average of $139.61 — up 4% from last year, and it’ll be the second-highest level of personal spending in the NRF’s 13-year history.
Retailers Are Prepared
Target (NYSE: TGT) is ready for the holiday season. It’s taken efforts into improving its website to ensure it is easy to use on all devices… computers, tablets, and phones.
It’s also increased its toy selection by 15% since that’s a huge chunk (50%) of its holiday sales.
Target spokesman Eddie Baeb said:
We’ve made back-end platform changes that are designed to enhance day-to-day functionality — from account management to checkout — and build more capacity and flexibility as we head into the holiday season.
Another major retailer, Amazon (NASDAQ: AMZN), has been preparing for the holiday season by increasing its holiday employees — the company has hired 120,000 workers, a 20% increase from last year.
And just like Target, Amazon has been focusing on its website and mobile app — making sure it can handle high volumes of traffic while also providing an easy customer experience.
This year Amazon added a tool to its app called “watch a deal,” which will notify customers when certain holiday deals that they might be “watching” will be available to buy.
Companies need to have their websites and apps working properly and take the necessary precautions to avoid any type of crash. If their website or app crashes even for a minute, that could cost the company millions of dollars in sales.
Black Friday may not have the initial hype it once had, but it still begins the holiday season. And it looks like we can expect an optimistic season with a lot of deals… and a lot of spending.
Until next time,
Pro Trader Today