The biggest Black Friday sales ever… Who is the final winner? This is Gi-yeol’s Silicon Valley Now

I’m in the West Valley Valley Fair, a large shopping center located in the center of San Jose. I expected it to be packed because it was the weekend right after Black Friday, but it seems like there are only people around on the usual weekend. It’s the first Black Friday since Corona Endemic, but there aren’t many discount items that are more unconventional than I thought, and there aren’t that many people. What about online retail?

America’s year-end shopping season has finally officially begun. Last Thursday, the 24th, the day after Thanksgiving, the 25th was Black Friday. Most companies go on sale on this day by offering unconventional discounts. It’s a day when businesses can deal with stockpiled inventory, and consumers can buy things they would normally buy at much cheaper prices. The first Monday after Saturday and Sunday is called ‘Cyber ​​Monday’, and consumers who have returned to their everyday lives after the holidays rush to shop online. This continues the shopping season all the way until Christmas in December.

This year’s Black Friday has the meaning of being the first Black Friday since the end of the COVID-19 pandemic. In the last two years, offline shopping has been impossible in a situation where face-to-face contact is not possible. As you know, the United States is now in an endemic situation where masks are rarely worn. The point to watch was how much offline shopping would increase and how much online shopping would decrease. In addition, the market was interested in whether consumers whose wallets had become thinner due to inflation would increase or decrease their consumption during Black Friday.

So, to check this, I went to a big shopping mall here in San Jose, the center of Silicon Valley, last weekend. Not a few people visited the centre, but it was only for the usual weekend. There was a line in front of luxury stores, but it wasn’t that long, and there weren’t that many signs announcing unconventional sales in every store.

I guess I wasn’t the only one who felt that way. The Wall Street Journal published an article called Black Friday back, but people are less crowded. The New York Times also wrote an article with the headline that economic uncertainty looms as retailers try to boost and normalize sales. Another WSJ article titled Why Door Knocker Deals Are So Hard to Find This Year. Doorbuster is a discount product that is so unconventional that people break down the door during opening hours and jump in. It is presented as a bait product and induces the use of other users who enter it. But this year, there weren’t many deals like that. Reuters also reported that fewer people than usual gathered in offline stores and shopping malls as it rained in parts of the United States.

The overall mood of Black Friday can be summed up as shoppers return to the centre, but fewer than expected, and fewer disruptive incidents.

So let’s actually check the numbers, shall we? Let’s summarize the numbers that have come out so far from the 28th US time.

According to Adobe Analytics, which tracks sales on retailer websites, consumers spent $9.12 billion on the 25th of Black Friday. It’s an all-time high. It is also a 2.3% increase from last year when $8.92 billion was recorded. The company makes this forecast by analyzing purchase data from 85% of the top 100 Internet retailers in the US.

There were many expectations that this Black Friday spending would not be big, but in reality, it means that there are still many consumers who opened their wallets. It is said that even in a situation where the monthly inflation rate has increased by almost 10% recently and the Fed raises interest rates significantly, it is said to have been used. In particular, it is interpreted that there were many consumers who chose to shop online, although it did not seem very common offline.

In 2020, when the dependence on online shopping increased significantly due to the spread of Corona 19, online shopping sales increased significantly to $ 9.03 billion, and last year it decreased slightly, but this year, despite concerns, it returned to the increase .

By item, electronics increased by 221% compared to average daily spend in October. Toys increased by 285% and exercise equipment by 218%.
There have also been changes in buying behavior during this period. Buy Now Pay Later, or BNPL, payment through advance purchase and payment has increased significantly. Like a credit card, it’s a fintech service where you pay for goods or services first and then pay back later, but you don’t accrue interest for a set period of time. In the week since the 19th, the number of purchases using BNPL has increased by 78% and 81% in terms of volume. This means that many consumers have put off their actual spending for a while.

In addition, the share of smartphones in online orders has also increased. 48% of all online orders were made on smartphones, an increase of 4 percentage points from 44% on the previous year.

On the other hand, online shopping on the 24th of Thanksgiving Day also recorded an all-time high. It reached $5.29 billion, up 2.9% from the previous year. That’s about twice as much as online spending, which averages between $2 billion and $3 billion a day.

Adobe predicts that online shopping will remain strong even after Black Friday. It was analyzed that it would have spent $4.52 billion on Saturday, the 26th, and $4.99 billion on Sunday, the 27th.

Then how did you predict Cyber ​​Monday sales? Adobe predicted that online shopping sales on the 28th would be between $11.2 billion and $11.6 billion. This is an increase of 8.5% since last year. Last year, Cyber​​​​Monday sales fell by 1.4% last year as promotional events were held from early October for early inventory management. In the end, it was above 11.3 billion dollars.

What you need to pay attention to in the data that online shopping is increasing like this is which company sold more. E-commerce companies, including Amazon, of course, and representative offline retailers such as Walmart, Target, Macy’s, and Best Buy also operate online stores. These online shopping sales include sales from these companies.

It’s still a little early, but let’s take a look at the analysis from Wall Street and distribution industry experts to see who the winner is this Black Friday and Cyber ​​Monday shopping season. Meanwhile, Amazon, which has been an online shopping powerhouse, has been defeated, and traditional retailers such as Wal-Mart are assessed to have emerged online as well.

Bank of America saw that discount retailers had the upper hand. In particular, Wal-Mart was the first. To capture the demand for online shopping, Black Friday deals were opened four days earlier, and discounts were released two days earlier for paid Walmart+ members. We prepared a fairly large discount and analyzed that the traffic was strong. We set a price target of $165. This is a level with 7.5% alongside the closing price on the 28th.

Costco, a discount warehouse type store, was also highly rated. Televisions and household appliances were displayed at the front of the shop, and demand for clothes, household appliances and groceries was high. We present a price target of $605, citing a healthy increase in customer visits and a high membership renewal rate. This is an amount with a potential of 13% alongside the closing price on the 28th.

According to the Telci Advisory Group, the winners of the Black Friday shopping weekend are the discount stores. We attribute this to consumers’ preference for one-stop shopping for necessities and valuable items. Customers were attracted by fast order fulfillment, extensive inventory, price reductions across categories, and active online promotions.

Deutsche Bank also said there were decent trends across discount and department stores, with specialist retailers the relative winners. Walmart, Bath & Body Works, The North Face, Old Navy, American Eagle, Lululemon, etc. It is an analysis that the product availability of these retailers has generated consumer sympathy and increased profitability.

Morgan Stanley also cited Lululemon, American Eagle, Abercrombie & Fitch, and Victoria’s Secret as companies with strong traffic.

Piper Sandler Upgrade Target from Neutral to Overweight. After predicting sluggish sales during the year-end shopping season, this time, it was upgraded after seeing sales trends. We saw an opportunity for gross profit to recover next year.

In comparison, online shopping powerhouse Amazon is silent. Amazon, which has been cutting costs aggressively by starting to lay off 10,000 people after third-quarter earnings were lower than expected, has not been able to stand out very much during the peak shopping season. If you look at this CNN article, the Amazon devices are still in stock, but I think you can see that they are slower than expected.

In addition, according to analysis by Captify, an advertising technology company, as a result of searching for the number of ‘Black Friday’ discounts online, Amazon fell from No. 1 last year to No. 4 following Walmart, Target, and Coles This year. This is in stark contrast to Walmart’s rise to number one with a 386% increase in searches.

Meanwhile, the number of offline visitors on Black Friday is showing signs of recovery, but has not met expectations. According to Sensormatic Solutions, offline store visitors increased by 2.9% compared to last year. However, Bank of America analyzed that this figure was lower than in 2019, before the pandemic. It means that it has not yet recovered to its pre-corona level. In addition to this, the National Retail Federation (NRF) predicted that November-December sales would increase by 6-8% from last year.

All in all, online shopping seems to have become a trend now. It seems that looking for a store directly can see that the corona pandemic has greatly reduced. If you look at the reason, you can see that it is because you don’t have to go to an offline store to buy a big discount product. Traditional retailers didn’t open stores on Thanksgiving Day, but they eagerly grabbed consumers’ attention with online ‘Black Friday Big Deal’ ads. It can be seen that consumers suffered consumption due to inflation, etc., and then mostly consumed online when the big Black Friday deal appeared.

The final report card for this shopping season has not been released yet, but based on the data and analysis so far, I hope you will be able to judge which companies will deliver better 4Q results than expected and make successful investments.

Silicon Valley = Correspondent Seo Gi-yeol philos@hankyung.com