Black Friday sales broke records this year, but there seems to be a shortage of the viral videos depicting wild shoppers desperately squeezing through the doors of every major retailer, trampling anyone or anything in their way. Thankfully, the stampedes have left the stores and are now flooding websites instead. Foot traffic was down by as much as 6% YoY this Black Friday, while online sales rose by double digits, as an increasing number of consumers embrace e-commerce. While that is bad news for retailers who lack a significant online presence, a number of brands like Walmart, Nordstrom, and Target are prepared to capitalize on e-commerce focused initiatives that will allow them to compete with the likes of Amazon in the online market.
According to Adobe Analytics, which monitors the online transactions of 80 of the top 100 web retailers in the US, expects that 20% of total revenue generated this holiday season will be spent between Thanksgiving Day and Cyber Monday. Shoppers have so far doled out a record $72.1 billion online between November 1st and December 1st.
While retaining the “Black Friday” tag, the rush for Christmas-time bargains truly begins on Thanksgiving Day. The record $4.2 billion American shoppers spent online on Thanksgiving was up 15% versus last year.
“E-commerce giants” ― which make over $1 billion in annual revenues ― had a 244% rise in sales on Thanksgiving Day, according to Adobe, while smaller retailers saw just a 61% increase.
On Black Friday itself, $7.4 billion in online sales marked another all-time high. The average order value for the tracked online retailers also showed a boost, up 6% to $168.
While these figures are impressive, they’ve actually fallen short of estimates of $4.2 billion and $7.6 billion, respectively.
Although traditional brick-and-mortar retailers have started to capitalize on online sales, some have fallen further behind the e-commerce boom. Stores that are not seeing a boost from their online offerings will likely suffer this holiday season as foot traffic to US stores may have fallen by as much as 6.2% on Black Friday, per ShopperTrak. RetailNext estimated traffic was down just 2.1%, but average transaction values dropped 6.7%, and overall sales declined 1.6%.
Meanwhile, chains including Target, Walmart and Best Buy Co. have posted strong sales in recent years by leveraging their stores to handle deliveries, serving as an instant pickup location as opposed to waiting for an Amazon package. In an effort to chase down Amazon’s 1-day (or same day) delivery, Target now sources 80% of its online orders from stores, not warehouses. In most cases, expedited delivery comes with an up-charge for your order, whereas an in-store pickup usually does not.
The ability to get an order to consumers immediately is an especially powerful tool at this time of year since, for most gift-givers, December is a sprint to the finish and time is of the essence. 61% of online shoppers plan to take advantage of same-day shipping or in-store/curbside pickup this year. Options like these have so far this season generated 39.9% more in sales than last year, Adobe said. Forbes reports that this Black Friday saw a 43% uptick in buy-online-pickup-in-store (BOPIS) orders.
Other retailers, however, including Gap, Kohl’s, and Bed Bath & Beyond, look like they’re about to be slammed by online competition. Bed Bath & Beyond serves as a great example as it makes a huge chunk of their business out of knickknacks and other small specialty products that Amazon can now offer for smaller sale prices and ship very cheaply. The company has reported same-store sales declines for the past 10 quarters, and for the past two quarters they’ve been down around 6%. Kohl’s and Gap have each recently slashed their full-year profit outlook for 2019. CNBC writes that it could be a make-or-break season for each of these 3 retailers.
Nordstrom saw the biggest increase in online sales during Thanksgiving and Black Friday compared with last year, at 60%, followed by Walmart at 53% and Amazon at 49%, according to an analysis of about 300,000 transactions done by Edison Trends. Target, by contrast, saw its online sales fall around 12% during that same period, while J.C. Penney’s fell around 14%.
Perhaps the most optimistic news for both online and brick and mortar retailers is that the brightening economic outlook may also help boost Holiday spending For this year’s November-December period, the National Retail Federation expects retail sales to rise between 3.8% and 4.2% to between $727.9 billion and $730.7 billion. That is stronger than the 2.1% growth of last year, but less than the 5.2% increase in 2017, per the Wall Street Journal. The figures exclude automobiles, gasoline and restaurants. Online sales are expected to increase by 11% to 14%, accounting for roughly 23% of overall sales.
Not only does wage growth remain near a decade high after rising strongly over the past 2 years, surpassing 3% growth for 5 consecutive quarters now, but household debt as a share of income is lower today than it was in 2008. Additionally, according to James Bohnaker, economist at research firm IHS Markit, the savings rate remains high, hovering around 8%, compared with August 2005, when the rate was just 2.7%.
Traditional retail as a whole has suffered from the disruption that e-commerce continues to serve up, as short positions being held against the SPDR S&P Retail ETF (XRT) last week reached 666% of the fund’s available shares, according to data from financial-analytics provider S3 Partners. Business Insider notes that’s the highest level of short positions since March, and is more than triple its level from a year ago. Year-to-date, the XRT has only risen about 6% versus an S&P 500 gain of nearly 25%. Contrast that against the Amplify Online Retail ETF (IBUY), which has returned about 21% over the same period, and it becomes very clear that e-commerce has taken the dominant position for investors.
While some like Walmart and Nordstrom have managed to go all-in on their online presence and buck the trend, it seems the “retail apocalypse” is still very much alive for others.
Retail (XRT) vs E-Commerce (IBUY) vs Walmart (WMT) vs Target (TGT) vs Bed Bath & Beyond (BBBY) vs S&P 500 (SPY)
Questions, comments or learn more about subscribing to MRP, contact – Rob@mcalindenresearch.com/646-964-6152.
Disclosure: Interactive Brokers
Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from McAlinden Research Partners and is being posted with permission from McAlinden Research Partners. The views expressed in this material are solely those of the author and/or McAlinden Research Partners and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: Margin Trading
Trading on margin is only for sophisticated investors with high risk tolerance. You may lose more than your initial investment.
For additional information regarding margin loan rates, see ibkr.com/interest