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Consumer Spending Trends for the Holidays

Written By Brian Hicks

Posted December 3, 2013

Wal-Mart (NYSE: WMT), Target (NYSE: TGT), and many other stores decided to open as early as they could this year. They opened not Thanksgiving night, but Thanksgiving evening. They thought this would bring in more people who were hungry to spend money.

targetUnfortunately, it seems as though people were still full from dinner because while millions of people showed up to shop, they weren’t spending as much money as retailers had hoped.

The National Retail Federation reports there were over 141 million Americans shopping over the big four-day weekend (Thanksgiving, Black Friday, Saturday and Sunday). These shoppers only spent about $407 on average. While this may seem like a lot of money to you, the average is down from last year, in which it was $423.55.

With people spending less money, total revenue was down by almost 3% at $57.4 billion.

If people aren’t buying as much, are they still purchasing Christmas gifts for their friends and family? It seems they are, but many people are turning to the Internet.

Cyber Sales

In this age of group deals and online discounts, people have been trained to search for the lowest price possible. They don’t just want a discount; they want a price that makes them feel as though they were able to get a really good deal.

With so many online merchants competing with one another, it only makes sense people find lower prices online. During the big four-day event that should have gone to brick and mortar stores, online sales rose 20%, according to ShopperTrak.

Then there is Cyber Monday, a day dedicated to online shopping. In years past, people often felt as though it was some big marketing ploy, but they are slowly coming to realize how good the deals can be.

Experts expected 131 million shoppers on Cyber Monday. And while that’s 10 million less than those that headed out to shop during the four days starting Thanksgiving, it’s only 10 million less considering it was one day rather than four. And it’s the amount of money those people spent that matters more. FedEx (NYSE: FDX) expected to ship 22 million packages on Cyber Monday, so that’s a good indication online shoppers are buying.

But online shopping isn’t surpassing retail yet. Cybersales still only account for 10%. However, the growth in online shopping is showing us that it’s probably heading that way. Amazon (NASDAQ: AMZN), the biggest online retailer, believes it will pass Target in revenue next year.

Next year is going to be interesting, that’s for sure. Gallup reported that 53% of Americans will do some online shopping this year, and this shows that people are getting more comfortable with the security of the Internet.

Part of the problem is also the economy. As it improves, people will likely begin to spend more money during the holidays. But right now, consumer sentiment is holding shoppers back.

Stephen Stanley, chief economist at Pierpont Securities, LLC, told Bloomberg:

Consumers are generally not in a great mood, feeling very uneasy about the economy and their jobs, and are looking for value this year.

Electronics takes up 4% of holidays sales, according to Yahoo! Finance, and with prices falling significantly, people are more apt to buy them as gifts. That’s what’s helping retailers such as Best Buy (NYSE: BBY) stay ahead of the rest when it comes to holiday shopping – especially since the company offers some of the best sales on electronics in the country.

Investing in Holiday Sales

As an investor, you’re likely more concerned with how you can make money from the holiday sales. From the information provided here, it’s likely you know where this is headed.

Online retailers are where you should look for investment opportunities. Inc. is a big one, up more than 50% since the start of the year. eBay Inc. (NASDAQ: EBAY) is another major – the second biggest online retailer behind Amazon.

Wal-Mart is doing well with both offline and online sales, which makes a good choice. Wal-Mart prides itself on its markdowns, and as people look for the best deals, the company is poised to make good sales this year between its brick and mortar stores and its website.

For offline sales, Best Buy is one of the best, along with Target.

Think of bargain and accessibility when you are choosing retail investments. People want to save money, and they want to be able to get what they want conveniently and quickly. Wal-Mart, Target, and Best Buy are huge chains, so stopping by one to find a deal is easy. Amazon and eBay also have almost anything you might want to buy, and most of the prices are lower than other sites.

Those are the factors shoppers are looking for, so they’re the factors you should be looking for in a holiday retail investment.


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