As November comes to a close, people are getting excited about what they have to look forward to in the coming month. Thanksgiving is quickly approaching, which means that Hanukkah and Christmas are right around the corner. Although the holidays are an exciting time for most, businesses are even more excited about the influx of cash they are going to make. Black Friday, the Friday after Thanksgiving, is one of the most important retail days of the year for most businesses, with around 30% of annual retail sales occurring between Black Friday and Christmas. Therefore, it is important for businesses to strategically plan how they are going to approach the Black Friday holiday in order to maximize sales and further stimulate the economy.

 

Black Friday is a traditional holiday for many US employees. It is typically a day full of special shopping deals and big discounts and is considered the beginning of the holiday shopping season. Since 1932,the U.S., Black Friday has been regarded as the beginning of the Christmas shopping season. It is referred to as Black Friday because many retailers usually make enough sales on that day to put them in the black for the year, meaning that they will begin to turn a profit. In 2015, 74.2 million people shopped on Black Friday alone, which is lower than the number in past years ranging anywhere from 85 million in 2011 to 92 million in 2013. Although the number of consumers have decreased in recent years, 74.2 million shoppers still means large profits for these corporations.

Black Friday is the name given to the first day after Thanksgiving. It is one of the most important retail and spending events in the United States. Every holiday season, prognosticators make predictions about the level of sales on Black Friday, and investor confidence may be affected by whether or not those expectations are met or exceeded.

If consumers follow up Thanksgiving by spending a lot of money on Black Friday and retailers show strong numbers, then investors might have their first indication that it is shaping up to be a particularly profitable shopping season. This confidence can be reflected in the stock prices of the retailers that post strong sales. Conversely, many take it as a sign of trouble if retailers are unable to meet expectations on Black Friday. Concern over the economy is magnified if consumers are perceived to be reining in their spending.

 

Black Friday is a name used for two unrelated occasions. It is now most popularly used in the US to refer to the day after Thanksgiving, which is often considered the first day of the holiday shopping season and is known for featuring discounts from retailers.

Black Friday is always the Friday after Thanksgiving, which is always the fourth Thursday in November. In 2021, Black Friday is November 26. In 2022, Black Friday is November 25.

The name Black Friday is also used to refer to September 24, 1869, the date of a financial panic in the US sparked by gold speculators.

 

It’s very common for retailers to offer special promotions online and in-store on Black Friday. Many open their stores 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.

Retailers may spend an entire year planning their Black Friday sales.

 

The rumors are true: The mad midnight rush of Black Friday is a thing of the past. Don’t be fooled by the foot-traffic lull, however. The holiday season’s window of opportunity for retailers is intact – it just looks a little less chaotic now.

For years, Black Friday was the single most important day of the retail year. Retailers would routinely declare that the incredible traffic and sales from this singular day after Thanksgiving was when books moved “into the black”. Businesses would create marketing buzz around the day by offering steep discounts, and Black Friday marked the official beginning of the holiday season – the period when 30%-40% of all annual retail sales occur.

 

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, when 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 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.2 Appallingly, a worker at a big store was even trampled to death on Black Friday in 2008, as throngs of shoppers pushed their way into the store when the doors opened.3

Black Friday and Stocks

Many analysts and investors scoff at the notion that Black Friday has any real predictability for either the fourth quarter or markets as a whole. Instead, they suggest that it only causes very short-term gains or losses.

Of note, the best U.S. sector from one week before to one week after Black Friday is retail. From 2007 to 2017, a grouping of S&P 500 retail stocks posted a 5% return, compared to the average 3% return for the S&P 500 over that period. For all 10 years, this basket of retail stocks has traded positively for the 10-day period.23 This trend continued with the S&P 500 Retailing Industry Group outperforming the S&P 500 by 1.5% and 0.1% during that period in 2018 and 2019, respectively.4 This pattern didn’t continue in 2020, when the S&P 500 returned 4.1% but the retailing industry group only returned 2.2%.5

 

The concept of retailers throwing post-Turkey Day sales started long before “Black Friday” was actually coined. 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.4

So why the name? Some say the day is called Black Friday as an homage to the term “black” referring to profitability, 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.4

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.4

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—using a descriptive that’s no longer acceptable—started to refer to this dreaded workday as Black Friday.4