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Invesco’s Cohen: This year’s Black Friday reflects changing consumer behaviour

By Ido Cohen, Fund Manager at Invesco.

Black Friday was once considered to be the beginning of the US Christmas shopping season. Scheduled on the day after Thanksgiving, many people would swap family time for long lines at the mall, as retailers pulled out all the stops to entice shoppers into their stores. This usually translated into a day of big discounts and heavy footfall for brick-and-mortar stores.

While few countries celebrate Thanksgiving, Black Friday has since been adopted in many other parts of the world. In the early noughties, Canadians used to flock across the border to nab great deals, but retailers at home soon ran discounts of their own. Online retailers, such as Amazon, then introduced the concept of Black Friday – and its newer cousin Cyber Monday – to more distant places across the globe.

As investors in the consumer sector, we understand the frenzy around these ‘shopping holidays’ very well. However, even though such events can provide short-term tailwinds for many retailers, they have little impact on our investment decisions. Our aim is to find companies that are well-positioned to benefit from secular changes in consumer behaviour. Some of them may well be crowned the winners of this year’s Black Friday, but the truth is they’ve been winning the retail game for some time now, because the world is becoming increasingly connected.

Online shopping will continue to take share

We believe that eCommerce will continue to take share from traditional brick-and-mortar retail and that the magnitude of that share shift is still underappreciated. We only have to look at how consumers plan to shop on Black Friday this year to see this trend – while 52% of surveyed shoppers from key economies have shown interest in shopping inside stores, more of them (71%) have indicated they’re likely to shop online instead. What’s more, the trend remains the same, even after dividing the survey results by age group.

Figure 1: Black Friday shopping intent 2021

Source: Criteo, Consumer Sentiment Index 2021.

In our view, companies that rely heavily on brick-and-mortar presence and mall foot traffic for sales, but lack presence on large eCommerce platforms, are ultimately swimming against the tide, as consumers shift an ever-larger share of their spending to eCommerce. Covid-19 has only served to accelerate this move. Many people have had to shift their shopping online during the pandemic, and we expect that some of them will have become ‘sticky customers’.

Figure 2: eCommerce share of retail sales before and after Covid-19

Source: Mastercard Economics Institute as at 31 January 2021.

There are numerous tailwinds on the horizon for eCommerce. There are large retail categories to attack (such as food and consumables, auto and luxury goods), while improving user interfaces and rapidly evolving fulfilment networks could make ordering online feel even more seamless than it does now. We believe that Amazon is particularly well-positioned to become the leading aggregator of merchandise, content and services – an ‘everything on demand’ platform.

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