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November 25, 2015 at 08:29 AM
Over the past two years, Black Friday sales estimates have fallen: Does that mean the unofficial kick-off to retailers’ holiday season has lost its impact?
The last few years have seen some pushback from consumers as retailers have extended their Black Friday shopping events to start on Thursday, leading some big brands like Nordstrom and Costco to pledge to leave their stores closed on Thanksgiving, and outdoor supplier REI to extend that pledge to Friday.
What does that mean for investors?
Online retail sales have grown faster than Black Friday sales, according to a recent paper from LPL. The report noted that Cyber Monday grew out of consumers’ tendency to take advantage of their employers’ faster network speeds to do some holiday shopping online when they returned to work after Thanksgiving. Now that broadband Internet is widely available, online retailers aren’t as dependent on that Monday shopping boost, but many still offer deals on that day, LPL wrote.
The growth in online sales doesn’t exclude traditional retailers. Many also offer online shopping, with larger stores often leveraging their distribution network and multiple locations to allow free shipping to a customer’s local store, according to the report.
However, strong cyber sales haven’t offset an overall decline in sales over the four-day period, LPL found.
While online sales grew from $1.5 billion in 2012, to $1.7 billion the next year and $2 billion in 2014, those numbers are dwarfed by the declining Black Friday sales numbers: $59.1 billion in 2012, followed by $57.4 billion and $50.9 billion over the next two years.
“The recent trend of stores opening on Thanksgiving, as well as additional discounting closer to Christmas (Super Saturday, the Saturday before Christmas, is one such example), indicates customers may be spreading out purchases throughout the holiday season and diminishing the importance of the four-day shopping period. Sales for the holiday season overall have actually increased over the years, despite the drop in Black Friday sales,” LPL wrote.
In fact, many retailers’ fiscal year ends in January to include holiday sales, meaning the first quarter shows the impact of holiday shopping. LPL found that Q1 sales have increased steadily over the past 15 years, and gross profit margins are highest during this period of highly discounted products for retailers.
