Cyber Monday Adds to Shopping Frenzy

NRF estimates that about 122 million Americans are expected to go online this year

c1After a four-day holiday weekend shopping frenzy starting on Thanksgiving, consumers have their sights set on the next discount shopping target – Cyber Monday. Cyber Monday, which is the Monday after Thanksgiving, has typically been the busiest day of the year for online shopping. The National Retail Federation (NRF) estimates that some 122 million Americans are expected to go online this year to make the best of huge bargains, compared to 121 million in 2015. Although millions of consumers shop over the Thanksgiving weekend, most reserve some portion of their budgets exclusively for Cyber Monday, knowing there would be good deals for all things electronic and digital.

Cyber Monday, in which retailers offer promotions exclusively online, is driven mostly by consumers’ growing appetite for high-tech electronic goods and devices. Traditional retailers like Wal-Mart Stores Inc. (NYSE: WMT)  and Target Corp. (NYSE: TGT) are seeing their online sales increasing over the months, and are hoping to grab market share from retail behemoth Amazon.com Inc. (NASDAQ: AMZN) and other online sellers. For retailers, Cyber Monday represents a huge opportunity to extend the strong weekend sales during Thanksgiving.

Cyber Monday pours on to Cyber Week

c2Cyber Monday is expected to be the biggest online shopping day ever, racking up an estimated $3.36 billion in sales, an increase of 9.4% over 2015, according to Adobe Digital Insights, a research firm that tracks retail website sales. A survey by the NRF found that 36% of consumers plan to shop online on Cyber Monday, up from the 34% in 2015. Overall online sales are expected to hit record levels this holiday season.

For instance, Wal-Mart announced its Cyber Monday deals to make sure that the holiday shopping season does not end with Black Friday. For 2016, Wal-Mart started the promotion, which is actually Cyber Week instead of just Cyber Monday, on Black Friday itself. The retailer stated that there will be about 2,500 deals available daily, with some spanning the whole week and others only offered on a specific day.

The big box chain Target announced that it would be offering a 15% discount on nearly everything its sells both online and in its stores. The Cyber Monday sale started Sunday itself. Home appliances retailer Sears Hometown and Outlet Stores Inc. (NASDAQ: SHOS) announced last week that Cyber Monday sale would begin a day earlier and run a day longer.

cm3After record-breaking Cyber Monday sales in 2015, Amazon said it plans to offer more than more than 75,000 deals during the week of Cyber Monday this year. Last year on Cyber Monday, Amazon customers ordered more than 54 million items worldwide, a record-breaking 629 items per second, with this year’s sales expected to break earlier records.

Clue to consumer trends

Retailers are changing their promotions strategy in response to the buying patterns of consumers. Instead of discounts and markdowns on a select few products, retailers are shifting to a stream of discounts and alerts during the entire week via email and mainstream social media platforms.

Although the massive discounts squeeze their profit margins, retailers are willing to take a hit to their margins as a means as of keeping their inventory low, and thereby decreases the amount they have to spend hanging on to excess stock. Moreover, consumers are waiting longer to start their holiday shopping, which puts pressure on retailers to keep the promotions going for a longer period of time. Almost a quarter of consumers surveyed by Prosper Insights were waiting for better deals and had not purchased anything on their holiday lists yet, a higher percentage than last year.

Retailers are also grappling with marked shift toward more prudence on the part of consumers. Cost-conscious consumers have been much more deliberate about the purchases they make, since they are able to access information in a very transparent way because of the existence of smartphones and technology-enabled pricing that provides comparative pricing and the best deals on various websites.

Outlook for holiday season: retail sales to grow at faster pace

c4Research firm comScore predicts that online spending on Cyber Monday will jump to $3.5 billion from $3.12 billion last year. The firm’s preliminary holiday shopping forecast, which includes November and December 2016, is for online sales to rise as much as 19% to $81 billion.

NRF forecasts holiday sales for the November and December 2016 to rise 3.6% to $655.8 billion, better than the 3% growth seen in the year-ago period, excluding autos, gas and restaurant sales.

Overall, U.S. retail sales are predicted to grow at a faster pace than last year, fueled by rising wages and a stronger job market. Sales climbed 3.2% in 2015, and the seven-year average since the recession ended in 2009 is 3.4%, as per NRF. Non-store sales may increase 7% to 10% in 2016, reaching as much as $117 billion. Online sales are forecast to account for about 90% of non-store sales. NRF predicts that consumers seeing steady job and income gains throughout the year has resulted in continued confidence and greater use of credit, which bodes well for more spending throughout the holiday season.

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