Shares trading
Go long or short on over 16,000 international shares with CFDs or spread betting, or buy and sell shares via our share dealing service.
'Black Friday (noun): a made-up holiday to boost the economy once a year.' – Anon.
Black Friday has become one of the sales events of the year, encouraging consumers to spend billions on gifts and self-indulgence, and unofficially kicking off the start of the holiday shopping season that can make or break a retailer’s year.
The original idea behind Black Friday was to get consumers to open their purse strings earlier in the year and this is still proving true today as spending continues to rise annually. This US export has proven to be a boon for many retailers around the world, which play on consumers' rabid appetite for a deal to drive sales, lure in new customers and push additional products.
But as Black Friday has evolved, extending from a one-day event into weeks of discounted deals and inspiring rival sales that compete for our money all year round, there is evidence that this event designed for the benefit of retailers is in fact having a detrimental effect on the industry. The relentless focus on discounts has led to a sledgehammer approach to pricing and trained consumers to rank their searches by price, encouraging a race to the bottom. Many argue the concept is ludicrous because these lower-margin or even loss-making sales shift business away from the more profitable holiday season in the subsequent run-up to Christmas.
Ahead of Black Friday 2018 we have a look at what stocks to trade and evaluate whether the retail sector’s own creation is still working in its favour or contributing to the demise of an industry that has been struggling in recent years.
What is Black Friday and how has it evolved?
Black Friday is a sales event created in the US and introduced in the 1940s as a way of using discounts to get people to head to the shops the day after Thanksgiving. The day of deals has become as much of a tradition in the US as the holidays it is sandwiched in between, but it is a newer development in other countries around the world.
UK consumers have been the most welcoming to Black Friday and lead the charge across Europe. The first event was only held in 2010 when Amazon expanded its Black Friday sale but it didn’t grab widespread attention until 2014, when most outlets had been dragged into participating by the big corporations and mainstream media thoroughly covered the stampedes and fighting in stores across the nation.
The event has grown so large that the biggest retailers in the US and Europe prepare 12 months ahead, with companies like Sainsbury's-owned Argos declaring it the biggest single day for sales of the year.
Read more: Sainsbury’s synergies with Argos helps boost profits
Black Friday vs Cyber Monday
Although the world was firmly on the path toward the digital age at the turn of the millennium, the era of online shopping was only just starting to gain traction as home computers became more common and internet speeds were upgraded. Still, there was a notable trend of higher online sales in the US on the Monday following Black Friday that sparked a theory that many shoppers were still browsing deals instore over the weekend as they had done for decades but holding off to purchase them online using their work computers.
At the time, digital retailers were still emerging businesses and looking to steal a slice of the pie from the bricks-and-mortar stores that were reaping most of the rewards. This led to the day being branded in 2005 as Cyber Monday by the National Retail Federation, a US trade association. This was the first rival to Black Friday’s success and it has shown that this industry-wide approach to sales can pay off: revenue on the first branded Cyber Monday in the US saw sales jump by over 26% year-on-year to nearly $500 million and that had exploded to $6.6 billion by 2017. Cyber Monday was designed to accelerate the shift toward online shopping and it has worked, with more people shopping online than instore each year since 2015. Last year, Cyber Monday was the single biggest sales event in the US, beating Black Friday sales of around $5 billion.
Cyber Monday has been able to overtake Black Friday due to the popularity of online shopping, with mobiles gradually becoming the device of choice. Mobiles were used for nearly half of all sales in the US last year and accounted for one-third of revenue (suggesting consumers prefer smaller-ticket items). Mobile sales were up 39% year-on-year and broke through the $2 billion mark for the first time.
Can Black Friday fend off rival sales on Prime Day and Singles Day?
More recently, the triumph of these new corporate holidays has inspired the biggest retailers to launch their own sales events. In the US this has been pioneered by Amazon’s Prime Day that offers exclusive deals to its subscribers and its rival Alibaba has led the charge behind Singles' Day in China, an anti-Valentines holiday that encourages singletons to treat themselves with a shopping spree in the absence of love.
One of the main reasons Amazon has been so supportive of this cut-price model of selling is because it helps the firm tighten its stranglehold over the market and either force smaller rivals out of business or to work through its platform so it can take a slice of the sales. It also offers an opportunity to improve market penetration by selling products (even at a loss) that help retain customers, improve engagement and lift incremental sales such as its Alexa voice assistant-powered smart speakers. Considering over half of all online trade on Black Friday goes through Amazon, it is unsurprising the firm decided to launch its own event in 2015 to mark its 20th anniversary. By limiting Prime Day to its subscribers it gets the best of both worlds without cannibalising its own sales on the Black Friday event that is open to the public, providing another opportunity to convert them into Prime subscribers, which boosts the next Prime Day sale and so on.
Read more: Amazon Prime Day keeps propelling the flywheel
Alibaba has taken a slightly different tact but one that seems to have made the world of difference. Singles' Day surfaced as an unofficial holiday in China in the 1990s as a way for single people to buy themselves a gift on November 11, but this was picked up by Alibaba in 2009 when its first sale generated nearly $8 billion in sales. Today the holiday sees everyone, not just those who are single, indulge in purchases and sales of $31 billion on Alibaba’s Singles' Day now comfortably outstrip total sales over both Black Friday and Cyber Monday in the US, Canada and Europe combined.
Read more: Alibaba breaks records with Singles' Day shopping frenzy
.jpg)
