Retailers Were All Aboard The Gravy Train This Black Friday

Retailers Were All Aboard The Gravy Train This Black Friday
Paul Allison, CFA

3 months ago2 mins

Mentioned in story

What’s going on here?

Rich and luscious online Black Friday sales left retailers swimming in cash.

What does this mean?

Black Friday traditionalists might make a habit of lining up outside stores at the crack of dawn, but most modern shoppers prefer browsing thirty tabs while gnawing on a leftover turkey leg. Case in point: US shoppers spent nearly $10 billion on online shopping this Thanksgiving season according to Adobe analytics, 7.5% more than the same time last year. Now, some of that increase could well be down to the impact of this year’s higher prices, even after discounts. But because inflation’s made folk more budget-conscious, Americans likely seized the chance to do their pent-up spending and holiday shopping when price tags were smaller than usual. With that out of their system, though, retailers may be a lot quieter for the rest of the year.

Why should I care?

For markets: Pay up (please).

A lot of that spending was probably charged to credit cards, making those stocking fillers next month’s problem. But that could be a problem indeed: today’s interest rates are as high as they were in pre-crisis 2007, making payments more expensive to keep up with. Now, banks wouldn’t turn down a few pricey interest payments on outstanding debts, of course. But the number of credit card delinquencies – that’s debt payments over a month late – are now sitting at a level last seen back in 2012, an ominous sign for the personal borrowing industry.

Credit card delinquencies
Source: Statista

The bigger picture: Life in plastic, it’s fantastic.

Roughly 1% of every single swipe – including the virtual ones – goes straight to banks and payment firms like Visa, Stripe, and Mastercard. And sure, they can’t get their grubby hands into stores’ money drawers, but only around a fifth of all global spending is still done with cash, down from roughly half in 2007. That trend is only headed in one direction, so it’s no wonder shares of Visa and Mastercard are at all-time-highs, then.

US payments by type
US payments by type | Source: The Federal Reserve
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