Cyber Monday won't be all about discounts this year, shipping is also likely to play a role in which companies win and lose.
The holiday shopping season ramps up this weekend with Black Friday and Cyber Monday. The season’s official kick-off falls later in the month than it did last year, effectively eliminating a full week’s worth of sales from the most crucial time of the year.
While the timing isn’t ideal, it looks unlikely to stop people from spending. eMarketer says consumers could spend into the trillions for the first time ever this year. The National Retail Federation says the average shopper will spend $1,048 during the shopping season.
Where they spend it is another question entirely. Of course, discounts and promotions will play a role, but this year shipping has become a major focus for U.S. retailers. The upcoming Black Friday/Cyber Monday shopping data will reveal who won the shipping battle, and whether it was worth participating in.
Black Friday and Cyber Monday will give AMZN a chance to prove to investors that its $1.5 billion investment in one-day shipping was worth it. Over the summer, the firm’s Prime Day sale exposed some growing pains for Amazon’s logistics arm as the firm was unable to meet one and two-day shipping expectations.
As SunTrust’s Youssef Squali put it,
Prime Day was the first proving ground for one day. The fourth quarter will be even bigger.
Not only is Amazon betting that one-day shipping will entice more Prime signups, but the firm believes faster shipping will also encourage members to shop more. In Q3, AMZN’s online sales rose 22%, helped by increased shipping speeds. Q4’s sales data will be even more telling. Investors can expect that a marked increase over the course of Black Friday and Cyber Monday will give AMZN stock a bump to finish the year.
While Amazon was once known for offering the lowest prices, that association has started to fade as the firm focuses more on convenience. Walmart, though, has held onto its reputation for offering rock-bottom prices. That’s especially true on Black Friday, where Walmart has become infamous for it’s mega-sales.
Google Trends shows that Walmart has the highest Black Friday-related search volume and comes second only to Amazon for Cyber Monday-related searches, proving that the firm’s reputation alone has shoppers’ attention.
Like Amazon, WMT has started offering next-day shipping. The service comes free of charge for customers whose orders total more than $35. Unlike Amazon, though, Walmart’s massive physical footprint affords the firm more delivery options that won’t cut into margins as heavily. Click and collect, for example, allows customers to pick up their goods in-store.
The shorter shopping season will certainly put a squeeze on logistics companies like FDX, whose profitability depends heavily on its ability to deliver parcels on time. The firm says it’s expecting to facilitate the delivery of a record 33 million parcels on Cyber Monday.
With its share price down 2% so far this year, FDX could be the dark horse of the holiday shopping season as long as the weather holds out. No severe weather is predicted to disrupt service significantly over the next few weeks, a good sign for FDX’s Q4 figures.
Investors have been hesitant to hold FDX due to worries about competition from the likes of Amazon. While that’s certainly something to consider, FDX’s network of 700 planes compared to Amazon’s 70 illustrates FedEx’s impressive position within the logistics space.
Target is another big winner this holiday season, especially now that it’s upped its game in the e-commerce space. Like Walmart, Target has beefed up its shipping options, and is entering the shopping season with a strong product portfolio including Disney “shop-in-shops,” which should drive traffic.
Hasbro (NASDAQ:HAS) also has a lot riding on a successful holiday shopping season. The majority of the firm’s revenue comes from the second half of the year as holiday toys make their ways to shelves. This year, HAS partnered with Disney on a line of Frozen 2 items, which should be a boon for the toymaker considering the movie had a record-breaking opening weekend.
As of this writing, Laura Hoy was long AMZN.
Last modified: September 23, 2020 1:18 PM