Shoppers are not going to wait until Cyber Monday to make all of their online purchases if actionable savings are offered earlier in November. From a logistics point of view, it makes sense for online retailers to even out their sales rather than invest in logistical capacity to accommodate extremely high peak demand on one day only.
So while we still look at America every year and shake our heads as consumers can and will do anything to get a bargain, the importance of Black Friday has and will likely decline as technology continues to alter our purchasing behaviour which now operates 24 hours a day and no longer depends on the traditional 9 a.m. to 6 p.m. bricks and mortar shopping model. If Thanksgiving weekend sales disappoint this year, don’t fret…wait until you see total holidays sales at the end of December to determine whether or not this year’s holidays shopping season is a success.
A Quick look at retail sales
In terms of overall retail sales trends, 2015 has seen a slowing of sales growth. Recent reports have been lacklustre, especially considering many expected retail sales to benefit this year from the so called ‘gas/oil dividend’. Though retail spending has been rather weak, it’s unlikely to deter the Fed in their decision on whether or not to raise rates this year. Economic growth is low, but the U.S. consumer remains strong. Aggregate spending, employment growth and an unemployment rate nearing the Fed’s target are just some pieces of data which point to a healthy consumer. Two primary drivers of retail sales which are worth watching are consumer confidence and wage growth.
Both remain in longer term uptrends, despite the recent rollover from new highs this year. The trends remain up and to the right, despite the recent softness. Wage growth still has room to grow to get back to pre-recession levels, but the jump thus far this year is very encouraging, with wage growth finally breaking out of levels which can only be described as anaemic. Demographics and e-commerce are important themes which will affect consumer spending habits for years to come.
Online shopping will continue to grow, the obvious beneficiary is Amazon (AMZN), however traditional retailers with a strong and growing omni-channel offering will continue to benefit. Demographics play an important role on consumer spending. The shift from accumulating goods to lifestyle choices and a focus on experiences is evident. The share of personal consumption as a whole of services is now nearly twice as large as goods, and the two are trending in opposite directions with growth rates in services consumption far exceeding goods in recent years. These divergent trends show where consumers are spending more of their money.
Thanks for reading and have a great holiday weekend.
Note: charts sources to Bloomberg unless otherwise noted.
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