Black Friday’s online spending reached a record $9.8 billion this year, marking a 7.5% increase from the previous year. Despite early holiday sales by many retailers, Cyber Monday is projected to surpass this, potentially generating $12 billion in sales, making it the biggest sales day of the holiday season and the entire year.
However, the pace of growth has moderated post-Covid. Between 2013 and 2019, the compound annual growth rate (CAGR) stood at 21%, but it has since dropped to single digits growth in the past few years.
In the current economic climate, with recession fears and high inflation potentially diminishing spending power, any growth is welcomed, even if it’s modest.
Amazon is poised to be a major beneficiary, holding a 37.8% share of the U.S. ecommerce market. This could translate to approximately $3.7 billion in revenue on Black Friday alone, nearly quadrupling its typical daily revenue from the last quarter. Cyber Monday sales may potentially add another $4.5 billion to Amazon’s coffers.
It’s important to note, however, that Amazon traditionally sees increased revenue in the last quarter due to holiday sales. While good Black Friday and Cyber Monday sales are encouraging, whether Amazon will surpass earnings estimates remains to be seen.
The U.S., with consumer spending comprising 69% of its GDP, heavily relies on continued consumer expenditure for economic growth.
A key concern has been the depletion of Americans’ pandemic-era excess savings, raising fears of a potential drop in consumption.
Yet, this year’s Black Friday record sales suggest otherwise, indicating that Americans continue to spend despite lower savings and slower income growth.
Interestingly, this spending behavior is increasingly being supported by borrowing. The Federal Reserve Bank of New York’s latest report shows a $45 billion increase in credit card debt in Q2 2023, a 4.6% rise in just one quarter, bringing the total credit card debt to $1.03 trillion for the first time. This equates to an average balance of $5,733 per cardholder.
This spending culture is welcomed by businesses and investors, as it drives profits. The national trend mirrors this, with the U.S. government continually increasing its deficit through borrowing.
As long as debts are serviced, spending continues to boost the economy, everyone is happy. I expect the U.S. stocks to perform well many years from now, buoyed by this sustained consumer spending. The situation may change when this trend shifts, but for now, the “music” continues.
