Black Friday, the economic environment and the evolution of America’s retail holiday

On November 29, American shoppers will rush to malls and retail stores for the day known as “Black Friday,” the unofficial start of the holiday shopping season. Falling annually on the Friday after Thanksgiving, the event generates billions of dollars for the U.S. economy, topping out last year at $9.8 BILLION. In addition to the end-of-week bargains, the discounts and deals now extend to the weeks before and after Black Friday, growing the potential for revenue.

With the economy a hot button issue in 2024, a great deal of focus may fall on Black Friday sales as a measurement of the country’s economic health and shoppers’ faith in their financial standing.

Marshall News spoke with Lars Perner, associate professor of clinical marketing and a Black Friday expert, about 2024 Black Friday, the economic factors that affect revenue, and how the retail holiday has changed over the last five years.

Do you see Black Friday as a direct indicator of economic growth or the country’s economic health?

I think it’s probably more of an indicator of the way that economic health is perceived. There’s still a perception among much of the population of heavy inflation. Inflation is much more under control than most people believe at the moment.

Part of the problem is that the inflation has been particularly apparent in certain hot button areas like food. Even that is probably more under control right now, but there’s still that perception. And it’s very difficult to make any sense out of the economy right now. We don’t know what Donald Trump is actually going to follow through on.

Obviously, if he were to impose the large tariff, especially on Chinese products, that would have an immeasurable effect. A lot of people may be a bit ambivalent about what’s going on, so I think that certainly Black Friday sales will reflect, to a large extent, the perception of the state of the economy, but not necessarily the actual health of the economy.

The other thing to realize here is that we can talk about the economy as a whole, but the reality is that it’s made up of a lot of people who have experienced very different situations. Even though it’s been a while since the COVID-19 pandemic, we’re still in the aftermath. During COVID, some people were able to save up a lot of money, but there weren’t as many opportunities to spend.

Other people’s savings were severely depleted, and different people have been affected differently by inflation and other factors. Even though the economy currently is fairly strong, there are still a lot of people who are suffering and are having difficulty making ends meet from year to year.

Do the same economic factors historically affect whether people are willing to spend a lot on Black Friday or not?

I think that it’s complicated because during the pandemic, opportunities to spend were limited. A lot of people engaged in what we might call “compensatory spending” afterwards to catch up. However, at the same time, when things were more readily available, some people were concerned about inflation. So there were somewhat contradictory signs in the economy.

But generally, I think people are driven to a large extent by their confidence in the economy, and there might be specific factors. The price of oil and gasoline are very visible indicators. When the prices shoot up in that area, that may cause people to put on the brakes more than the actual impact on the budget, just because it’s so visible.

Last year’s sales were extremely high. What do you anticipate for this year?

I think they’ll be solid. They won’t be a disaster. It all depends on how things unwind here as people hear about the political transition. There may be a lot of people who would be confident in the economy with Donald Trump, so they may be willing to spend.

There may be other people who are worried. There’s so much polarization that people could go in different directions. My suspicion is that sales will be moderately strong, but probably not as impressive as what we might have seen last year.

How reliant is the market on actual products that are coming out? Are those driving most of the sales, or is it more about the economic environment?

By now, the supply chains are mostly caught up. During the pandemic and right after, there were serious shortages in some areas. But by and large, supplies have caught up and the dollar is relatively strong at the moment. You can get fairly good deals and supplies on imported items, but obviously you can’t buy what doesn’t exist. I think the shortages are more specific to certain categories.

Which categories are those?

Products that are related to services, where you have difficulty hiring people. Also, a lot of gifts that are given just as a matter of pragmatics—electronics and other things imported from China. Right now, the Chinese economy is struggling, so they’ll likely make anything available that there’s a market for.

The one issue here is that the holiday discounts are heavily premised on ordering a long time in advance. Many of the very large chains commit more than a year ahead of time to buying huge quantities. In return for that, they get rock bottom prices. But it does mean that you have to make some predictions now that the supply of one particular type of item may be limited, and there may be certain hot items.

Are there certain retailers or brands or markets that are more reliant on a successful Black Friday than others? And what would those be?

Today, most retailers that sell consumer products are heavily reliant on holiday sales. Retail is largely about volume. If your sales go up, then your profits go up quite disproportionately, assuming that you didn’t have to discount too heavily to get these volumes.

The toy industry certainly would be very heavily dependent. I haven’t seen the most recent statistics, but it used to be that more than half of all toys were sold during the holiday season. I don’t see a reason why that would have changed, so they’d be highly dependent.

In addition, mass merchandisers like Walmart and Target get a lot of sales. Costco ramps up quite a bit for the holidays.

There are other things, like furniture, that might be more dependent on the health of the economy as a whole. But it’s all difficult to say because today Black Friday and the surrounding holiday sales are really much more than gift buying. A lot of people end up buying other things while they’re on sale.

The bottom line is that most consumer retailers will tend to be heavily dependent on holiday sales.

How does the lateness of Thanksgiving this year affect the market?

It used to have a huge impact. In fact, back when Franklin Roosevelt was president, Roosevelt actually rescheduled Thanksgiving one year. It became known as “FRANKSGIVING.” The buy-in was limited. Some people celebrated Thanksgiving one week, and others a different week depending on when they got time off.

That said, it used to be a huge deal when the holidays came late. I’m not sure it matters quite as much today because of all the online shopping that’s being done. You’re not going to be truly pressed for time to shop even when Thanksgiving falls late.

It used to be considered bad form to have sales before Black Friday, but now that [sales window] has been pushed much earlier. It used to be that some of the online merchants would start selling early during Thanksgiving week. Now, it’s been pushed to a week or even two or three ahead of that.

Part of the issue here is the idea of “preemption,” that once people shop in one place, that is part of the budget that goes away. There might be some flexibility in increased spending, but a lot of firms want to catch the holiday shoppers before they get a chance to spend elsewhere.

What is the biggest change that you’ve seen in regards to Black Friday over the last five years?

What’s happened most over the last five years is the acceleration of the beginning of Black Friday sales. We’ve seen, for example, Amazon especially coming up with a lot of the early sales.

That means competitors have to follow. When Amazon does something, then Walmart and many others will do the same, and the brick and mortar stores have to follow along. The arms race, so to speak, has begun earlier and earlier.

There’s no limit to how far back you can get things. There used to be some cultural reaction to having sales too early, but increasingly people have come to expect it. Some people might philosophically bemoan it, but there’s not that same visceral reaction anymore.

You think Amazon is leading this change?

Yes, they are, in part because of the sheer amount of the merchandise that they sell. Also, because they can target people very closely. The entry page that each individual gets is different based on his or her past experience or purchases.

It’s a lot more difficult to do that in the brick and mortar format, where you have to move things out and coordinate quantities and distribution to different stores. Amazon definitely has been effectively leading the market. By now, a lot of people have been with Amazon for quite some time. The more data that Amazon collects on each individual, the more specifically they can target different items.

What are the ripple effects of a Black Friday that fails to meet expectations?

When you fail to meet expectations, you have a lot of merchandise on hand that is going to dramatically decline in value. After the holidays, people will want to buy some of these things, but not in the same quantities. That creates a temptation to discount massively, and that becomes an arms race because your competitors are going to do much of the same thing.

By the time that you realize that sales are falling short, you also probably won’t be able to reduce your employment. The ripple effect is going to take some time, but [low sales] would have a definite impact on the economy. It’s a vicious cycle: Some firms make less money so they let some of the employees go, and over time, those employees spend less.

And what are the effects of a huge splurge on Black Friday?

If there’s a huge splurge, then [the ripple effect] depends on the extent to which the firms have ordered less supplies. You might find selection in some product categories going down. You’ll also find that there’d be less of an incentive for the sellers to discount, realizing that they’re having an easier time to sell the merchandise.

It also depends on what’s driving the heavy sales. If it’s genuinely a time of prosperity and people have the cash to spend, that’s a good thing for the economy. If people buy much of the holiday merchandise on credit, then that’s going to catch up with them in the early part of the next year.