Black Friday

What Is Black Friday?

Black Friday 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 the beginning of the holiday shopping season. In history, Black Friday was a stock market catastrophe that took place on September 24, 1869. On that day, after a period of rampant speculation, the price of gold plummeted, and the markets crashed.

Black Friday can also refer to an 1869 stock market crash. 

Understanding 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 2008, 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 among other big box retailers: Best Buy, Kmart, and Walmart quickly followed suit.

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 seen as the unofficial start of the online holiday shopping season. The idea is that consumers return to work after the Thanksgiving holiday weekend, ready to start shopping. 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.

As a result, in terms of sales, Cyber Monday has proven to be a hit among shoppers. In 2018, Cyber Monday sales reached a new record, totaling $7.9 billion in the United States. This handily beat out Black Friday's sales, which came in at $6.2 billion.

Shopping Stats

According to the National Retail Federation (NRF), an estimated 186.4 million consumers in the U.S. shopped during the 2020 5-day holiday weekend between Thanksgiving Day and Cyber Monday, down slightly compared to 2019, but still higher than 2018's $165.9 million. The average amount spent on holiday items during the weekend was $311.75, down 13.9% from the $361.90 average in 2019. Of that total, $224.48, was spent on gifts, roughly the same percentage as last year. For the first time more than 100 million people shopped online on Black Friday and the number of online-only shoppers increased 44% for the entire period, up to 95.7 million.

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 slower 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 fourth-quarter 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.