Holiday 2020: Online vs Physical Shopping

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Holiday 2020: Online vs Physical Shopping

With two major US shopping days behind us – Black Friday and Cyber Monday – here’s what we know so far in terms of how Q4 consumer spending is going, courtesy of Adobe Digital Insights:

  • Black Friday: Online spending hit $9 billion the day after Thanksgiving, up 21.6 percent year-over-year. That was the second-biggest online spending day on record in the US following last year’s Cyber Monday. Thanksgiving also reached an all-time high for that day, up 22 pct y/y to $5.1 billion.

    Additionally, the use of curbside pickup at physical stores rose 52 pct y/y.
  • Cyber Monday: Online spending reached a record $10.8 billion on Monday, up 15.1 pct y/y.

    The use of curbside pickup increased 30 pct y/y.

Bottom line: consumer spending has been fairly resilient this holiday season as Americans adapt to shopping online and taking advantage of shipping or curbside pickup amid the public health crisis. One vector into measuring just how robust sales are for products popular during this time of year is looking at Google Trends search volumes for “macbook” and “hp”. Here’s what these show:

  • Queries for “macbook” (blue line) and “hp” (red line) peak the week of Black Friday every year. While the latter is not a “product” per se, we use it as a proxy for non-Mac computer demand.
  • 2020 was different, as searches for both terms spiked after lockdowns in mid-March, remained elevated through early May, fell slightly thereafter through July, hit a 2-year peak in August before back-to-school and then trended lower through early November.
  • Searches for “macbook” and “hp” have risen 74 pct and 48 pct since the trough the first week of November through this week, both besting levels reached the week of Black Friday 2019. Queries for “macbook” and “hp” are up 4 pct and 9 pct versus Black Friday last year.

Takeaway: despite the two huge waves of interest for “macbook” and “hp” that surpassed 2019 Black Friday sales levels earlier this year, both products were able to see a third spike in queries that once again exceeded last year’s holiday levels at this time. Given still high unemployment and economic uncertainty, that shows how resilient electronics demand is just now as consumers take advantage of seasonal promotions. Additionally, we were worried that with such a massive tech upgrade cycle in March and August, this consumption surge would pull forward demand from Holiday 2020. That is clearly not an issue for tech hardware companies and retailers.

As for the rest of the holiday season, consumers can only shop online for so long amid shipping constraints, so they will need to feel comfortable enough to visit physical stores for last-minute gifts. We use the Dallas Fed Mobility and Engagement Index for the US as a whole as a general sentiment indicator related to consumers’ comfort in leaving home. It uses data from SafeGraph to track how often, long and far cell phone users venture away from home.

The chart below shows a 5-day rolling average back to the start of this year as a baseline (pre-lockdowns). A few points on this data:

  • The latest 5-day rolling average reading of -58.7 was as of last Saturday. That’s down from the post-pandemic high of -27.9 on 9/6, one day before Labor Day as Americans traveled and prepared for the holiday. Much of this decline was from many Americans staying home on Thanksgiving and the two days after due to the public health crisis.
  • This reading was +1.53 a week before lockdowns on 3/9, even with March typically being a light month for travel. That compares to the best reading this year of +10.56 on 1/31 pre-pandemic and the worst reading of -110.21 on 4/10 post-pandemic.
  • As you can see on the right-hand side of the chart, activity has been slowly rolling over since the end of September, long before the Thanksgiving week break.

Takeaway: online shopping may have shined on Black Friday and Cyber Monday, but stores have one more chance to draw customers to their physical locations in the coming weeks when it’s too late to receive packages in time for Christmas. Delivery networks are already having trouble handling capacity, with UPS telling drivers to stop picking up packages from certain major retailers, such as Nike, Gap and Macy’s. We will continue to monitor the Dallas Mobility and Engagement Index because if it does not improve, that means consumers likely do not feel confident or safe enough to visit stores despite their last-minute Christmas shopping needs.

Bottom line: US consumer spending remains fairly resilient even with a slow economic and labor market recovery as Americans switch from shopping in stores to online. While there’s ten days or so left of shopping online to reliably receive packages before Christmas, any incremental holiday sales thereafter will come down to consumers’ willingness to frequent malls and physical stores which they have largely avoided thus far.