Happy Cyber Monday

I cannot stress the importance of this Christmas retail season. This is a big test for the consumer. Wall Street is bracing for the worst, expecting retail sales to be the lowest in five years.

Why is there such an importance placed on this year? I would argue that one of the main factors to keeping us out of a recession is consumer spending. The consumer has not slowed down in a very long time. Through the use of debt, consumer spending has remained vigilant even through the tough years at the beginning of this decade.

Last Friday (Black Friday) was the start of the Christmas retail season. This year, Black Friday was stronger than last year. So, are we in the clear? You have to look behind the headline numbers. I would argue that these numbers don’t even remotely tell the whole story.

1) In order to get customers in the stores, retailers had to give the items away. The discounts were extremely deep. For the debt trapped consumer, these deals were necessary. Thus, they are going to show up in droves.
2) The average amount of money spent per consumer was lower than last year. You could look at that stat in one of two ways. The average could be down because of the low prices or it could be down because consumers are spending less. I would suggest it is a little of both.
3) The marketing of the 3 a.m. and 4 a.m. sales was a huge hit. That, in combination with the low prices, packed the consumers into the stores.

The big question is what happens in the next few weeks before Christmas? What happens after the deep discounts end? This will tell volumes about the state of the consumer. As long as retailers are willing to lend money and defer payments, the sales should be propped up to a certain degree. However, I doubt we are going to see strong retail sales for this Christmas season.

Today is cyber Monday and is the online shopping version of Black Friday.

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