MasterCard’s Take On Black Friday

Sarah Quinlan, SVP and Group Head of Market Insights for MasterCard Advisors looked into her Black Friday crystal ball and shared all that she saw with MPD CEO Karen Webster. Quinlan has some interesting predictions for who’s going to thrive and why the role of discounting and experiences is getting consumers to open their wallets. And now you get to look too to see exactly what Quinlan and MasterCard are seeing.

 

Black Friday has arrived – the day when shoppers around the nation flock to the stores to take advantage of unbeatable sales at a plethora of stores. But what’s really in store for retailers and consumers this year? Sarah Quinlan, SVP and Group Head of Market Insights for MasterCard Advisors looked into her Black Friday crystal ball and shared all that she saw with MPD CEO Karen Webster. Quinlan has some interesting predictions for who’s going to thrive and why the role of discounting and experiences is getting consumers to open their wallets.

 

KW: So Black Friday is here. I would love to gaze into your crystal ball – tell us what will be happening today. Will retailers be disappointed? 

SQ: Well, I think it depends what type of retailer you are. What I think will be very positive is that consumers in America will be shopping. The question is – what will they be shopping for? As we’ve seen all year in 2014, the consumer has been shopping for experiences, not necessarily for goods. So what will be interesting to see is if they have pent-up demand to by apparel, electronics, and more as opposed to pre-booking a vacation and taking it now, or will they be buying restaurant gift certificates? What we’ve actually seen is a surge in that type of spending, and not necessarily on traditional goods they’d buy over the holiday season.

 

KW: So if you’re a retailer, listening to you and selling those traditional sorts of gifts that sit under the tree, what advice do you give them? What are they doing to get people to spend in their stores?

SQ: First and foremost, you have to create an experience. Making your store the experience will lead to increased shopping. One of the things also that we note if we look at SpendingPulse is a preference for small businesses versus large businesses. In that regard, what we want to see here is if you have, for example, a department store, how do you make each of the boutiques within it unique with a unique experience? Part of this can be gift cards so people can come back and actually experience it themselves as opposed to getting a specific good. That’s going to be extremely critical.

The other thing is that retailers can think about a quick way to set up an evening gift for their special customers, and things like that, which will help throughout. The whole shopping season isn’t just Black Friday – it really is from now until December 31st. Even the week after Christmas is a very large shopping week.

 

KW: How important is Black Friday as a percentage of the overall holiday spend? Does most of the shopping happen on Black Friday now?

SQ: Yes and no. It will be the biggest holiday shopping day of the year – there’s no doubt about that. It will drive spending for sure. But what’s fascinating is that we know that for example, in the category of jewelry, that will be left late until the Saturday before Christmas. If we look at some of the other categories in there, it gets spread out. But the actual kickoff is Black Friday. Then of course we’ll see some battles going on between those who were open on Thanksgiving and those who weren’t. We’ll have to referee that one afterwards to see how the consumer depends on it. From my perspective, I wouldn’t be too happy if my family left me at noon when I’ve been cooking for 8 hours.

 

KW: There has been a lot written about the retail experience around the holidays. Consumers are really not going to stores as often as they used to, and sales are down. Do you see that trend playing itself out this year as well? Are there any glimmers of hope for retailers, large or small, that you think will actually point to the fact that consumers are going to stores and shop this year? 

SQ: For sure. Every economic trend is really positive in the U.S., and that’s very exciting. We see the labor market clearly improving, and we’ve finally seen some pressure on wages as well, which will also help. And of course, we can’t forget the huge drop in gasoline prices, which puts money directly into the consumers’ pocket. So all three of those factors will absolutely lead to increased spending.

People are also having the confidence that they’ll keep their jobs – it’s not just that they’re going to save some because they don’t know if they’ll have their job going into the New Year. There is clear acceleration and clear acceleration in the U.S. economy that’s actually very positive which will lead to increase spending.

Another key thing is that it’s really helped that the weather has gotten colder. We actually saw a pickup in the first two weeks of November because there was that shift – people all of a sudden wanted winter clothing, for example. All of those things that make it feel a lot more like Christmas will absolutely help this trend in spending.

 

KW: So how important is discounting this season for retailers? I know you talked about the importance of creating an experience in the store.

SQ: It’s counter-intuitive, but those who discount the least have been doing the best in 2014. It’s very simple because it created the sense that there’s a limited supply of something that people might want, and I think that’s the big thing that we want to focus on here. If you start discounting, it creates in the consumer’s mind that they can get it cheaper next week, and it delays the purchase. You actually don’t always get that rebound spend.

For example, our research at MasterCard has shown that at the first two places someone shops on Black Friday, they spend 75 percent of the money they were going to spend that day. You don’t want people thinking they can get something cheaper because you don’t get that initial spend.

 

KW: Let’s talk about Cyber Monday, since that’s the new manifestation of shopping online. What do you see this year with respect to Cyber Monday?

SQ: I don’t think Cyber Monday will be as big as it was last year. Overall, e-commerce will be big, and we’ll have good double-digit growth there. But I think the distinction here is it won’t be on that day. We’re already seeing a number of retailers reaching out and focusing and starting things on Black Friday and doing Black Friday sales, not just focusing on Cyber Monday. So I think there will be an increased trend – and I also think consumers will not leave it late like they did last year, and risk not having it under the tree. I think we’ll see a steady purchasing in the e-commerce world.

 

KW: Do consumers shop differently and look for different things when they are shopping on Cyber Monday as opposed to shopping in stores on Black Friday? How do experiences versus discounting play out in shopping online for holiday purchases?

SQ: One of the things we know is that almost 50 percent of electronics are now purchased online. Clearly that will be a big focus on Cyber Monday – it’s an easy thing, a commodity. We know what the product is, so it’s easy to search by price or vendor, and it makes you feel comfortable purchasing it online.

In terms of in-store purchases, what people look for is something unique. That’s the difference. Shopping for apparel is done online more now because retailers have finally got the sizing and colors right. People know they can order something without having to return it. More retailers have spent the money on their sites to create that experience and content so people know what they’re getting when they actually purchase.

 

KW: So you think, all in all, it’s going to be a pleasant holiday season for most retailers?

SQ: I think it will be for most. The thing here is for retailers to ask what they can bundle in with their goods to create an ongoing experience – those will be the retailers who do better than others during this period.

 


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Sarah Quinlan
Senior Vice President of Market Insights, MasterCard Advisors

Sarah Quinlan is a Senior Vice President at MasterCard Advisors, responsible for Market Insights, which produces MasterCard SpendingPulse, a macro-economic indicator. Her team develops products that utilize MasterCard’s aggregated anonymous transaction data to delineate actionable trends. Prior to joining MasterCard Advisors, she was the Founder and CIO of Katen Capital, a global macro hedge fund manager. Previously, she was the Chief Investment Officer and Head of Alternatives for Saad Financial Services, S.A.  Prior to joining Saad, she was a portfolio manager at UBS, and at Lloyds TSB focusing on alternative investments. She was co-founder and portfolio manager of TwentyFirst Century Advisors, a small and mid-cap long/short hedge fund which was ranked in the Top 10 of Mar Hedge.

 

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