Market Update 2nd December 2024

Is it all an illusion?

As many of you are probably aware from mass email campaigns, it was Black Friday last week and today is Cyber Monday. This is an interesting concept where companies offer huge discounts over one weekend in November just after Thanksgiving. This has spread to happen over weeks now or the entire month. I think the first Black Friday deal I saw this year was at the beginning of November.

Where did it start? There are some earlier historical contexts for Black Friday but I’ll start with the most recent / appropriate for its current meaning. It was coined by Philadelphia police officers to describe the day after Thanksgiving when tourists and visitors came to the city and were particularly rowdy whilst starting their Christmas shopping.

Later it was taken on by retailers as moving accounts from being “in the red” to being “in the black” (i.e. profitable). Traditionally Black Friday focussed on in store deals and Cyber Monday was purely online. The move to more online shopping and the pandemic changed this, so deals are now both in store and online simultaneously.

Total sales from the Black Friday weekend last year were estimated to have reached £13.3 billion in the UK. In the US $9.8 billion came from online sales alone on Black Friday, and global online sales reached $70.9 billion. Both of these are an increase from the previous year. And the trend is set to continue into 2024 weekend.

In 2023 Inditex reported a 14% increase in sales in the six weeks leading up to December 11^th, obviously helped significantly by the Black Friday weekend. Amazon similarly reported a 14% increase in sales in their fourth quarter of 2023 vs the fourth quarter 2022. More than 1 billion items were purchased on the holiday weekend from Amazon in 2023, and probably not shocking to most of us that Amazon was reported to have been responsible for 18% of the total worldwide Black Friday sales.

Now for 2024, Nationwide have released some numbers from its members that transactions were up 12% on Black Friday 2024 vs 2023, and up 16% vs 2022. There is a helping hand this year in that the Black Friday holiday weekend falls on payday weekend, last year it was the week before payday, so sales were expected to have increased in 2024 vs 2023. But there is an expected increase in sales this year due to the increased cost of essentials, meaning more consumers will be looking for deals to purchase Christmas gifts or buy essentials.

In the US, customers spent an estimated $10.8 billion online on the Friday just gone and are forecast to spend over $13 billion today.

Is all the spending and saving on deals an illusion? In previous years some retailers have put the price of products up before the Black Friday weekend so when they are reduced they are essentially the same price as they were originally. Amazon notoriously do this at other times of the year anyway. They do this by quoting the RRP (recommended retail price) which is given by the manufacturer but doesn’t ever have to be sold at that price by the retailer.

Some prices after Black Friday never go back to the original or go down further after the discount weekend. Which? found that in 2023 4 in 10 deals were cheaper at other times of the year than on Black Friday. Most of the products these fake deals apply to are technology and appliances purchases.

An AIM stock actually does this as part of its business model. It’s a cosmetics business and has a website which essentially no one buys from but then when its products are sold in stores they can say it is being sold at a discount.

Although the hype around the deals can cause a frenzy, are consumers always getting the best deal? Looking further, it is important to look at the underlying annualised numbers. I’ve seen a few studies trying to understand at what level is Black Friday profitable for retailers. For companies like Amazon historically it has been a very successful weekend of sales, but less than a decade ago a report found Argos experienced flat sales around the deep discounting event which hurt the business.

Emily Cave – Research Analyst

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