What is Black Friday
Black Friday has two relevant meanings. In history, Black Friday was a stock market catastrophe that took place on Sept. 24, 1869. On that day, after a period of rampant speculation, the price of gold plummeted, and the markets crashed.
But the more contemporary meaning refers to the day after the U.S. Thanksgiving holiday, which has also traditionally been a holiday itself for many employees. It is typically a day full of special shopping deals and heavy discounts and is considered as the kickoff of the holiday shopping season.
BREAKING DOWN Black Friday
It's common for retailers to offer special promotions and open their doors during the pre-dawn hours on Black Friday to attract customers. To keep up with the competition, some retailers have gone so far as to keep their operations going on the Thanksgiving holiday, while others begin offering deals earlier during November.
Really avid bargain-hunters have been known to camp out overnight on Thanksgiving to secure a place in line at a favorite store; the most fanatical have been known to skip Thanksgiving dinner altogether and camp out in parking lots for days or even weeks to get great deals. The promotions usually continue through Sunday, and traditional brick-and-mortar stores see a spike in sales.
Black Friday and Retail Spending
Retailers may spend an entire year planning their Black Friday sales. They use the day as an opportunity to offer rock-bottom prices on overstock inventory and to offer doorbusters and discounts on seasonal items, such as holiday decorations and typical holiday gifts. Retailers also offer significant discounts on big-ticket items and top-selling brands of TVs, smart devices and other electronics, luring customers in the hope that, once inside, they will purchase higher-margin goods. The contents of Black Friday advertisements are often so highly anticipated that retailers go to great lengths to ensure that they don't leak out publicly beforehand.
Consumers often shop on Black Friday for the hottest trending items, which can lead to stampedes and violence in the absence of adequate security. For example, on Black Friday in 1983, customers engaged in scuffles, fistfights, and stampedes in stores across the U.S. to buy Cabbage Patch Kids dolls, that year's must-have toy, which was also believed to be in short supply. Appallingly, a worker at a big store was even trampled to death on Black Friday in 2013, as throngs of shoppers pushed their way into the store when the doors opened.
The Surprising Origins of Black Friday
The concept of retailers throwing post-Turkey Day sales started long before the day was actually coined "Black Friday.” In an effort to kick off the holiday shopping season with a bang and attract hordes of shoppers, stores have promoted major deals the day after Thanksgiving for decades, banking on the fact that many companies and businesses gave employees that Friday off.
So why the name? Some say the day is called "Black Friday" in homage to the term "black" referring to being profitable, which stems from the old bookkeeping practice of recording profits in black ink and losses in red ink. The idea is retail businesses sell enough on this Friday (and the ensuing weekend) to put themselves "in the black” for the rest of the year.
However, long before it started appearing in advertisements and commercials, the term was actually coined by overworked Philadelphia police officers. In the 1950s, crowds of shoppers and visitors flooded the City of Brotherly Love the day after Thanksgiving. Not only did Philadelphia stores tout major sales and the unveiling of holiday decorations on this special day, but the city also hosted the Army/Navy football game on Saturday of the same weekend. As a result, traffic cops were required to work 12-hour shifts to deal with the throngs of drivers and pedestrians, and they were not allowed to take the day off. Over time, the annoyed officers started to refer to this dreaded workday as "Black Friday."
The term quickly gained popularity and spread to store salespeople who used "Black Friday” to describe the long lines and general chaos they had to deal with on that day. It remained Philadelphia’s little inside joke for a few decades, although it spread to a few nearby cities, such as Trenton, New Jersey. Finally, in the mid-1990s, "Black Friday” swept the nation and started to appear in print and TV ad campaigns across the United States.
The Evolution of Black Friday
Somewhere along the way, Black Friday made the giant leap from congested streets and crowded stores to fevered shoppers fighting over parking spaces and pepper-spraying each other tussling over the last Tickle Me Elmo. When did Black Friday become the frenzied, over-the-top shopping event it is today?
That would be in the 2000s when Black Friday was officially designated the biggest shopping day of the year. Until then, that title had gone to the Saturday before Christmas. Yet, as more and more retailers started touting "can’t miss” post-Thanksgiving sales, and the Black Friday discounts grew deeper and deeper, American consumers could no longer resist the pull of this magical shopping day.
Today, Black Friday is becoming an increasingly lengthy event – a Black Weekend. In 2013. Target announced that instead of opening its doors on Friday morning, it would start sales on Thanksgiving evening. That started a frenzy across major retailers: Best Buy, Kmart, Walmart, and Macy’s quickly followed suit. However, adding a shopping day only seems to increase sales by only 1 percent to 2 percent, according to ShopperTrak, a site dedicated to analyzing consumer spending behavior.
It turns out that as Thanksgiving Day sales are growing rapidly, Black Friday sales are decreasing at just about the same pace. The primary benefit of opening on Thanksgiving: fewer shoppers out on Black Friday helping to keep the crowds smaller and the lines shorter. Still, Friday remains the busiest day, by far, of the holiday weekend.
Cyber Monday Competition
For online retailers, a similar tradition has arisen on the Monday following Thanksgiving. Cyber Monday is known as the unofficial start of the online holiday shopping season. E-tailers often herald their promotions and sales prior to the actual day in order to compete against the Black Friday offerings at brick-and-mortar stores. In fact, Cyber Monday deals are now available at both Walmart and Macy's from 12:01 a.m. on Thanksgiving Day.
As a result, in terms of sales, Cyber Monday is quickly catching up to Black Friday. According to statistics from the National Retail Federation, sales on Black Friday weekend (Thursday to Sunday) have fallen consistently since 2012. Even so, during the 2017 Black Friday weekend, 174 million Americans either took the trip to stores or shopped online, spending nearly $335.47 on average per person, according to the NRF. And more than 66 million people chose to shop in stores on Black Friday itself.
Residents of the Southern states typically spend more than those in the North. The state of Texas, and even more precisely the city of Austin, is home to the biggest spenders in the country. Other cities housing serious shoppers are Scottsdale, Arizona, and San Jose, California. States with a higher cost of living, such as Connecticut, Hawaii, and California, also tend to see larger expenditures.
Statistics show that men are more likely to shop on Black Friday than women, and to spend an average of 3 percent more. Statistically, age also factors into holiday spending, with those in the 50- to 65-year bracket spending nearly 75 percent more than those ages 18 to 25. According to the NRF, clothing, and accessories account for more than half of purchases made during Black Friday weekend.
The Significance of Black Friday
With people spending rather hefty sums of money on this notoriously busy shopping day, the sales chalked up on Black Friday are often thought of as a litmus test for the overall economic condition of the country and a way for economists to measure the confidence of the average American when it comes to discretionary spending. Those who share the Keynesian assumption that spending drives economic activity view lower Black Friday sales figures as a harbinger of slowed growth.
Some investors and analysts look at Black Friday numbers as a way to gauge the overall health of the entire retail industry. Others scoff at the notion that Black Friday has any real Q4 predictability for the stock markets as a whole. Instead, they suggest that it only causes very short-term gains or losses.
However, in general, the stock market can be affected by having extra days off for Thanksgiving or Christmas. It tends to see increased trading activity and higher returns the day before a holiday or a long weekend, a phenomenon known as the holiday effect or the weekend effect. Many traders look to capitalize on these seasonal bumps.
The Black Friday Stock Market Crash
Although "black" can allude to profitability, it is also often used to describe disastrous days in financial markets. For example, on Black Tuesday, Oct. 29, 1929, the market fell precipitously, signaling the start of the Great Depression. The largest one-day drop in stock market history occurred on Black Monday, Oct. 19, 1987, when the Dow Jones industrial average plummeted more than 22 percent.
The dubbing of these crashes as "black" days originated with one of the earliest stock market crashes in the U.S., in 1869. It was sparked by a ring of speculators, led by Jay Gould and James Fisk, who attempted to corner the gold market. In early September, they bought as much bullion as they could get their hands on, causing the price of gold to skyrocket. They also enlisted the help of Abel Corbin, the brother-in-law of President Ulysses S. Grant: They wanted him to persuade the president to limit the metal's availability, which would drive its price even higher.
But their attempt to use the White House to manipulate the supply failed. When Grant learned what was happening, he ordered the U.S. Treasury to sell gold instead. The government unloaded $4 million worth, and on Friday, Sept. 24, 1869, the price of gold fell from $160 to $130 per ounce. The gold market collapsed, causing the stock market to plummet more than 20 percent in the next week, ruining many investors. The day became known in financial history as Black Friday.