n the midst of sluggish retail data and fears of a spending slowdown, shopping on Black Friday and Cyber Monday kicked off higher hopes for the retail industry during the holiday season. Millions of Americans hit the stores or their keyboards, and retailers breathed a sigh of relief.
Because it accounts for about two-thirds of our total economic activity, consumer spending is closely watched. For years, the retail industry has viewed the sales on Black Friday (the day after Thanksgiving when many retailers finally go into the “black” for the year) as an indication of consumers’ willingness to spend during the holiday season. In our modern age, Cyber Monday has emerged as an important bellwether as well.
The Commerce Department recently reported minimal expansion in spending for the month of October (0.2%—the poorest growth since June of this year). The credit crunch and high energy prices, coupled with only a modest rise in individual income during October, had analysts bracing for an off fourth quarter as far as retail sales.
However, reports on spending during one of the busiest shopping times of the year, the days following Thanksgiving, have been favorable considering the economic restraints felt by many consumers. According to the National Retail Federation’s 2007 Black Friday Weekend Survey, over 147 million shoppers were out on Black Friday, an increase of almost 5% from 2006. And while shoppers planned to spend less than last year during this time, the increased volume more than made up the difference.
Online purchases have become a growing part of consumers’ planned holiday spending. This year, almost 27% of Black Friday weekend spending was spent online, up from 23% from last year.
But a far more recent trend has retail industry analysts paying attention to what is now called Cyber Monday. The term was coined in 2005 after online retailers noticed that there was a spike in online shopping on the Monday after Thanksgiving. Although not the busiest cyber shopping day of the year, this day is now seen by many as the kickoff to the online holiday shopping season.
According to the Nielsen Online Holiday eShopping Index made up of 120 online retailers, 32.5 million unique visitors entered online to shop on Cyber Monday, well above the 28.8 million that entered on Black Friday. The rising number of unique visitors during Cyber Monday and the increase in spending online year after year indicates that cyber shopping is not just a retail gimmick. It has become a holiday spending trend.
Although online retailers work to draw people onto the Internet through special deals, discounts, and incentives like free shipping, price is not the largest driver of growth in online shopping. In a pre-holiday survey of 1,000 online shoppers, the primary reason for shopping online was the convenience it offers (81%). The second most frequent reason was saving time (77%), followed by the ability to comparison shop and find things easily (61% and 56%, respectively). And it is sensible to imagine that after battling the crowds and traffic going store to store for good deals on Black Friday, a cyber kickoff to holiday discounts seems even more convenient.
Part of the convenience factor is that online shopping can be accessed at any time from anywhere. Even though more than a half of the homes in this country have high-speed access, BIGresearch found that 68.5 million people (54.5%) shop for holiday gifts from work, an increase from 50.7% in 2006 and 44.7% in 2005. Furthermore, comScore estimates that for the first 30 days of the holiday season, 45.5% of online retail spending comes from work locations, a number slightly higher than the 44.1% from home. I am not sure what that says about worker productivity this time of year, but that’s another story.
The numbers this year for Cyber Monday have indicated a good start for online retail. Hitwise Retail 100 Index indicated that traffic to retail sites on Cyber Monday increased by 26% over last year. In addition, comScore reported that online sales on Cyber Monday reached $733 million. Even despite fears of a weakening economy, comScore predicts overall holiday season e-commerce spending (Nov-Dec) of $29.5 billion, up 20% over last year’s $24.6 billion.
While Cyber Monday is watched as an indicator to this increasingly important segment of the retail industry, the challenge is to keep people buying throughout the holiday season. Retailers are increasingly using online tools to accomplish that goal, and as the Cyber Monday numbers indicate, consumers are indeed responding.