COVID Black Friday and the holiday season

Black Friday has traditionally been considered a great day for both consumers and companies. This is a great day because of the fact that it is among the very few days of the year that both buyers and sellers have the opportunity to benefit from each other simultaneously. Black Friday can also be one of the busiest shopping days of the year, as it follows the Thanksgiving holiday but also because it kicks off the holiday season. From the Black Friday Holiday all the way until the closing of the year, the sales that take place and the overall performance of the retailers plays a vital role for the economy in total. Yet the difference, due to the fact that this year has been specifically challenging for the economy, a closer look into the current circumstances will be provided through this report.

First, we could start by noting that in the past consecutive years there has been a tremendous increase in shoppers participating in this event. It is estimated that, in 2019 over 80 million people shopped on Black Friday in the US, while a figure over 180 million people had shopped for the period Thanksgiving through Cyber Monday. According to the past years, figures were expected to increase and for the trend to continue. However, at the moment the question in everyone’s mind is, what will be the consumer’s reaction this year with the ongoing pandemic affecting the economy’s performance? Black Friday in most of the countries of the world, has been an event that consumers would look forward to physically going down to the shops and spending most of their hours there. The main idea was going walking or driving from store to store and finding deals that were attractive, most probably at a very good prices. The goal of the specific day from a consumer’s perspective is to save as much money as possible. This is achieved by buying low-priced goods that in other circumstances would be more expensive. From the retailer’s perspective, the goal is to increase sales while providing products at reasonable prices enabling for a small or medium profit. This could be achieved by setting specific products in demand, at a larger discount price or selling products that were considered out dated and could have turned obsolete. There is a mixture of ways that retailers can provide very good prices to consumers and at the same time make profits for their own advantage. This is in most cases a win-win situation and that’s the reason the event is tracked globally and in some cases has broken outside the retail sector. Most stores from different industries are now finding ways to participate in the event and gain attraction.

Now, as the coronavirus pandemic is still very active globally and with an increase in new cases being announced on a daily basis, dark clouds are gathering over the event. A lot of people are following the measures announced by their respected governments or local authorities and have been home for most of the past couple of months. The pandemic has forced individuals to stay away from large groups of people, due to the fact that risks of coming face to face with an infected person increase. Some people are also very irresponsible in public places and may not be wearing a mask thus consumers may feel discouraged to go out. Most of the consumers have in mind the fact that the speed of the spread of the virus has increased tremendously as the winter season gets closer. Consumers are also somewhat affected and even scared by all the headlines in the media surrounding the matter and the holiday season is expected to be very different from what we have experienced in the past. In a way, we could say that consumers are already prepared not to attend this major event. However, there is one major difference compared to last year which is in favor of the retailers and the shop owners in general. After the harsh lockdowns that most of the world faced back in the spring months of the current year, businesses and retailers had the opportunity to further develop their online services as well as delivery services. The first lockdowns were a good test for the companies that had already built online infrastructure and we could say that from that period until the present, many other companies have managed to improve or create their own. In our opinion, online retailers are about to see increased numbers of orders in the next days, as well as revenue.

Companies like Amazon and Walmart which are classic large US retailers could get most of the attention during the Thanksgiving to the Cyber Monday period. We base this opinion, on the impressive performance they’ve had so far in 2020 during the pandemic, but also due to the fact that they have a large product base that enables them to provide an increased number of offers. Let’s not forget that consumers will not be required to leave their home to put in the orders as they will be saved by the use of their laptop and a few clicks. On the contrary, some analysts believe that the online services will not produce the same buzz of the previous years, as online sales may not be comparable to the Black Friday excitement feeling, of being at the shop and seeing the product physically. This could have a very negative impact on smaller retailers that have been patiently awaiting the holiday season for revenue that will help them survive. If the smaller businesses do not get some money, they could be going bankrupt in the final days of the year. This could further impact the economy as more people will be unemployed and growth could be capped.

However, as we cannot predict what will happen with 100% accuracy, it would be wise to allow for many scenarios to play out. It will be very interesting to see how consumers will react to the event, as this could be a forewarning of what could follow in the following weeks. In this case, the holiday season could be affected accordingly. This is also the reason why this year’s black Friday is so important for the economy. So far in the current year, consumers have not shown they are willing to overspend during the pandemic. Numbers confirm that consumer confidence has not been at its highest. Consumers are mostly focused on preserving their wealth, rather than spending it, as unemployment has risen tremendously especially in the US but also in other countries. If the negative effects on the economy are spread into 2021, then the trend of spending less money compared to previous years, could persist. We could also add that, consumers may have already acquired items during the lockdown measures in spring, which under other circumstances would be buying on black Friday. This could have a negative effect on the retail performance of black Friday for the economy.

In addition, the uncertainty over the further performance of the economy is felt on a very different front also. As a final note, with the election of the new US President Joe Biden, some analysts predict that investors may be forced to change their plans due to the economic actions his administration will take in the future.

If you have any general queries or comments relating to this article please send an email directly to our Research team at research_team@ironfx.com

Disclaimer:

This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.

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