December Newsletter: ‘When Black Friday meets Cyber Monday’

19 December 2015

‘When Black Friday meets Cyber Monday’

MVAM Newsletter Image 2015/12

As we approached the crucial Christmas shopping period, you may just have noticed the press hype around one of the more recent, but perhaps less obvious, American imports; ‘Black Friday’. This is the day, wedged between the last Thursday in November (‘Thanksgiving’ holiday) and the weekend, when US stores traditionally host their major sales events of the year and when retailers consequently move into profit (the ‘Black’) for the calendar year. Introduced by the likes of US retail giant Walmart (via its UK subsidiary Asda), Black Friday has become a regular event here in the UK too in the last few years and, whilst Asda decided not to participate, many UK retailers geared up once again in 2015 to try and boost some early high street footfall with enticing offers. Perhaps Asda saw it coming, but it all fell rather flat, with stores spectacularly quiet despite the bargains. Those journalists who had queued, cameras in hand, hoping to capture repeat scenes of mad scrambling and blood at the tills, were left disappointed.

But it’s not that we’ve decided to keep our money in our pockets after all this Christmas, far from it. Whilst the high street may have been blowing tumbleweed, the online cash registers (surely you mean Payment Processors ed.?) were busy ringing away as we chose to shop on the internet instead. Online sales soared and Black Friday simply merged into that other American retail phenomenon ‘Cyber Monday’, or ‘Web Weekend’ to coin a phrase.

The convenience that the internet has brought to our lives is changing our shopping habits more and more. With increasing speed and simplicity we can now shop from home, from work, or even on the move. We no longer need to move from the comfort of our own sofas to do weekly shops, home improvements, book holidays, do banking, or buy Christmas presents. The internet and the devices we use to access it, are changing what we spend our money on, how we spend our money and the way in which retailers do business.

But what does this mean for us as investors? Well we have to think about the way these changing habits might be negative for companies that we are invested in, or offer opportunities for others. For example, with so many of us now choosing to download books online, does anyone buy bookcases anymore? Also more recently, one of the bigger car manufacturers announced a move to sell more cars online direct to the customer -what will this mean for the dealerships?

More positively, with more and more business being done online, there is real growth opportunity for the payment processors that facilitate those transactions (so called ‘Fintech’ companies). As more product is being stored in larger and larger warehouses and being shipped direct to the customers, there are higher rental yields for the owners of warehouses and growth for the manufacturers of the automated warehousing systems that those warehouses are being kitted out with. As more goods are delivered to our door, companies that provide logistics are benefitting, even as the demand for traditional mail services decline. With less time out shopping, we have more time to spend doing things we enjoy, like cycling, playing computer games, or eating out. Finally, and with an eye on the most recent data from the British Retail Consortium we are clearly buying more sofas to sit on so we can surf the internet in comfort. And we’re even buying them online too.