Friday, Dec 3rd 2021

Black Friday all year long


As the popularity of baseball has waned in recent decades, America’s favorite pastime has become consuming.

Goods, services, content: Americans love it all. If political leaders learned one thing during the pandemic, it’s that if you give Americans money, they will spend it—with great enthusiasm.

As of October, U.S. real retail sales (in-person and online)—adjusted for inflation—were 13% higher than “pre-pandemic” levels.

The following chart compares total retail spending to February 2020, when the Covid-induced recession began, and we can see enthusiastic spending is not just a this-month phenomenon.

Retail sales have surged since the pandemic-induced recession ended

What the pandemic appears to have changed, in our view, is when and how that money gets spent. A report from Adobe Analytics published earlier this week suggested online spending over the Thanksgiving weekend (including the typically-infamous Black Friday) was down across the board.

According to Adobe, Cyber Monday sales dropped 1.4% from last year; Cyber Week sales — which cover Thanksgiving through Cyber Monday — dropped 1.4%; and Black Friday online sales dropped 1.3%. Plenty of outlets seized on this nugget of data as an ominous sign.

But zoom out, and Adobe’s data shows a much rosier picture.

From November 1, 2021 through November 29, 2021, Adobe’s data shows online consumer spending is up 11.9% over the same period last year. And the firm expects that from November 1, 2021 through December 31, 2021, online sales will rise 10% to a new record of $270 billion.

A common refrain we heard as the pandemic began is that this event would force ten years of change into one year’s time. This idea may overstate the magnitude of some changes, but we believe shopping behaviors have materially changed.

E-commerce sales as a percent of total retail sales in the U.S. peaked at 15.7% in the second quarter of 2020, but still totaled 13% in the third quarter of 2021. In the fourth quarter of 2019, the last full quarter before the Covid-19 pandemic, e-commerce sales accounted for just 11.4% of retail sales. And in our view, this figure likely understates the impact online shopping has had on many categories, given that retail sales include gasoline, which has not been disrupted by Amazon. (Yet.)

So with more consumer spending moving online, the patterns emerging this holiday season may suggest that our new, digital era for retail is less levered to the success of the traditional holiday shopping period.

Titan Flagship holding Shopify, for instance, enables any retailer to become an e-commerce powerhouse. Titan Opportunities holding Farfetch has brought much of the caché of luxury shopping into the online sphere. And Flagship holding Amazon’s Prime Day is a strong example of how a retailer can create a “shopping holiday” based on little beyond a desire to clear excess inventory.

As retail continues to move into the timeless, spaceless void of digital commerce, we believe these behavioral changes are just beginning.

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