Current issues related to the economy, (responsible) investment, pensions and income: every week an APG expert gives a clear answer to the question of the week. This time: economist Charles Kalshoven on what Black Friday tells us about the state of the economy.
Judging by the ads and the crowds in the shopping malls, Black Friday can count on enthusiasm from both retailers and consumers. But there is another group that benefits from Black Friday: economists. They use Black Friday's business results as an indicator of consumer confidence and stock price trends. Are companies making a lot of profits? Then the economic outlook is sunny. Are profits disappointing? Then we may be heading for a recession. “The great thing about Black Friday is that the spending tells us something about the mood of the consumer. So, you can already get an indication of the numbers for the fourth quarter,” Kalshoven explains. “When it’s a good quarter in terms of consumer spending, retail companies in particular benefit. And if it goes less well, they suffer the most. You can say that you can only spend a euro once, but I still think that good figures on Black Friday show consumer confidence in the economy. It’s an indicator, even though it may not be flawless. Also, because of the rising infections this year, people may be more cautious or stores may be stricter about admitting large groups of people. That can also affect the numbers. That’s why we have to keep a cautious eye on the figures at this time.”
There are also analysts who place little or no value on Black Friday as an indicator. They emphasize that the effect of all those purchases is only temporary, Thomas van der Lee at Semmie writes. After all, after Black Friday, spending declines again. This would also make the company results unreliable as an indicator of expected stock prices. However, it is true that Black Friday discounts are being spread out over an increasingly longer period. In the past, consumers had to make their purchases on the day itself, but now they can also get discounts the week before. However, a longer discount period and thus more sales do not necessarily lead to greater economic prosperity. By offering products at considerable discounts for longer, the profit margin on these products is reduced. This is then reflected in the business results. Seen in this way, Black Friday can lead to nasty surprises for companies.
For most companies, this will not be such a big issue. “The fourth quarter is the season they have to rely on. We already had Saint Nicholas and Christmas, and Black Friday will bring that season forward,” says Kalshoven. Thus, for this year, a 70% increase in purchases is expected between Black Friday and Christmas. And those extra percentages on Black Friday add up. “Look, if ice cream sales are 10% higher on January 1 than they were a year earlier, that’s not that relevant as a forecast for the rest of the year. In January, of course, ice cream sales don’t amount to much at all and then you quickly get distortions due to random outliers. Black Friday is different. Turnover is already at a higher-than-normal level. This, of course, means that there will be more growth. And it is therefore more relevant as an indication for the entire shopping season,” Kalshoven believes.
Companies will again do everything they can to lure customers. Kalshoven: “It’s part of a trend that commercial parties are good at creating a sudden urgency. Like a nightclub where there’s not much going on, but they make sure there’s a queue at the door so that people think something exciting is happening inside. Ten years ago, I had never heard of Black Friday, but now my spam box is full of ads for this day. It has all become much more commercial; just like Valentine’s Day, for example. Smart marketing, that’s what it is.”
The question, however, is how future-proof Black Friday is. “Today, people in the West look at consumption more critically than they used to. In China, they have Singles Day. That is embellished with game shows and live updates on how much is spent on that day. Consumption is still considered a measure of progress there. Here, we are more concerned with sustainability and we prefer to have as few disposable items as possible.”
And the term Black Friday, where does it actually come from? The origin lies - not surprisingly - in America, where the day after Thanksgiving (always on Thursday) is called Black Friday. There are various readings about the origin of the term, but according to Kalshoven the most likely explanation is that Black refers to the figures that stores can record on this day. The many sales mean that their red numbers are a thing of the past, and the weeks leading up to Christmas, when profits can be made, are starting.