With holiday season sales accounting for roughly 19% of retailers’ annual revenues, according to the National Retail Federation (NRF), Black Friday kicks off a critical shopping period. Black Friday spending declined the last two years in a row, and retailers are justifiably skeptical about what this season may hold. However, despite these concerns and recent high profile forecast revisions by some large merchants, retailers should be optimistic about Black Friday and Cyber Monday demand this year.
Black Friday spending peaked in the U.S. in 2012, with shoppers spending an average of $423 each and overall sales totaling $59.1 billion, according to the NRF. Both metrics have declined year-over-year since – falling to $381 and 50.9 billion, respectively, in 2014. Cyber Monday has fared better, topping $2 billion for the first time ever in 2014 and boosting total retail sales last holiday season up about 3% from the previous year, according to CNNMoney. This year, however, increased spending power and improved consumer sentiment point to a stronger Black Friday and following holiday shopping season than we experienced last year.
Employment is up. Two million more people have jobs now than at this time last year. In September, job openings in the U.S. were above pre-recession levels, meaning we’ll likely be seeing even stronger gains in employment before the holiday season comes to a close. This increased employment, coupled with slightly increasing wage growth, means consumers have more spending power than they did at this time last year.
Not only are we headed into Black Friday with more money in consumers’ wallets, but shoppers are also showing an increasing willingness to spend. Consumer optimism is strong, up 11.4% from the same time last year, signaling that consumers are more confident in spending and feeling more stable in their jobs and incomes.
With less uncertainty about the economy and the job market, consumers are increasingly willing to spend, spend, spend on Black Friday and Cyber Monday. However, as we’ve examined previously, key leading indicators for the 2016 economic outlook aren’t looking as merry and bright, so retailers should take advantage of the optimism now.