Welcome to Black Friday, the day where deals abound. Retailers seem unable to give consumers enough reasons to buy. This shopping holiday is not just exciting shoppers in the United States, but Great Britain is expected to have a strong day of retail sales as well.
Stores look forward to the coming month because shopping that goes on from Black Friday to Christmas makes up 30% of sales for the industry. The National Retail Federation is expecting 99.8 million (last year was a little over 74 million) shoppers to show up this season, but these numbers are usually more optimistic than the actual results in years past.
Before I get into the sales trends though, let’s get the bottom of where the name comes from because there are a lot of interesting stories and other “Black Fridays” that you should know about.
First the myths, the most prolific story in circulation about where the term “Black Friday” comes from is that it's the first day that retailers make an annual profit. Meaning today is the first day retailers go from “being in the red” to “being in the black” in accounting terms. This isn’t actually accurate though because stores have historically seen the largest sales on the Saturday before Christmas rather than the Friday after Thanksgiving. The first mention of Black Friday comes from September 24th, 1869, where we find a young Wall Street about to cause a financial collapse. In what would be considered market manipulation today, two traders decided to band together and buy up as much gold from the United States as they could. The price of gold skyrocketed into a bubble, and when investors realized what was going on, the bubble burst and everyone from farmers to bankers found themselves bankrupt.
The next mention of Black Friday comes in 1910 when the phrase came to describe a massive show of force by the British police against suffragettes advocating for their right to vote in Parliament. The Parliament had planned to decide on the right for women in the country to vote, but the governing body closed early due to what the suffragettes claimed was a false time constraint; a riot ensued. This day became the first documented police brutality case against suffragettes. About thirty years later, the term commonly referred to some of the deadliest days of World War II, and then became synonymous with the date that we know today because workers would commonly call in sick to gain a four-day holiday after Thanksgiving. Companies did not usually give paid leave for the day following Thanksgiving. The real story is how we find ourselves in Center City, Philadelphia.
Back in the 1950’s, the last place that you wanted to be was in Philly the day after Thanksgiving. The city was in complete chaos. Philadelphia Police Officers within the Traffic Squad coined the term “Black Friday” to describe the day with the worst traffic jams and crowds. Officers were mandated to work after Thanksgiving, and to add insult to injury, they were given mandatory twelve-hour shifts. Officers hated this. They had to be stationed at every intersection of Market Street to control crowds. They also had to stand outside of parking garages and lots because “lot full” signs did not deter motorists. Street sizes would shrink from two lanes two one because shoppers would double park. Shoplifters would then take advantage the thinly-spread police force and would steal at will. Tourists would also begin to flood the city because the huge Army-Navy football game would always be played the next day on Saturday. It was absolute madness.
Eventually, Officers began using the phrase in interviews, and that gave the phrase notoriety. In 1961 there was a concerted effort to change the name to “Big Friday” in hopes of leaving behind it’s dark connotation. The efforts fell flat and the term spread to the rest of the US in 1985 to describe one of the most prolific shopping days of the year. These days, millions of Americans are given the day off from school and work to shop and enjoy. Britain has seen a sharp increase in sales on this day as well thanks to retailers such as Amazon and Wal-Mart’s Asda. The term has also given rise to other shopping holidays like Small Business Saturday and Cyber Monday. But what does this mean for retailers?
Well the trends are not promising if you own physical stores. Macy’s saw a 4.7% drop in sales at existing stores last year. That fall likely came from the unusually warm season as the company saw an 80% reduction in sales of coats, hats, and other cold-weather clothing. Along with Macy's, retailers that sold similar product lines also blamed the weather.
The above graph only accounts for sales from Friday to Sunday. These sales are likely to fall again this weekend YoY for a myriad of reasons.For one thing, consumers are less likely to spend money using a credit card, instead they will use money that they have saved which leads to more conservative spending decisions.
How Consumers pay for their Holiday Spending
Companies are taking less profit from financing because interest rates on durable goods (products that last longer than five years) are lower. These include washers, televisions, and automobiles. Consumers that are not assured a steady income are less likely to spend on items in the consumer discretionary sector that rely on Black Friday to boost sales numbers.
How consumers find deals on Black Friday in 2016
The financial crisis of 2008, the government shutdown of 2013, and recurrent credit crises have caused a permanent “shift to thrift” where value becomes more sought after over quality. The above graph shows that more consumers are looking for ways to find deals. This graph includes consumers that may use multiple options to find deals. Many consumers are also looking to the internet to purchase their goods. The NRF reports that hiring has been in a downtrend since 2011 meaning that companies are finding less value in staffing their stores. This is likely a direct result of falling weekend sales and migration of consumers to the internet.
On a brighter note, consumer spending for the month is likely to increase as the United States economy picks up as shown in the graph and the projections below.
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Halkon, R. (2015, November 27). This is what the REAL Black Friday in Britain was all about. Retrieved from Mirror: http://www.mirror.co.uk/news/uk-news/what-real-black-friday-britain-6904738
Halkon, R. (2016, November 24). Why is it called Black Friday? The history behind the year's biggest bargain binge. Retrieved from Mirror: http://www.mirror.co.uk/news/uk-news/why-black-friday-called-history-6905688
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