Cyber Monday

Everything You Need to Know About Cyber Monday

Cyber Monday can be thought of as the online equivalent of Black Friday, which is a worldwide sales event that is notorious for its steep discounts and gigantic crowds. The event is observed the Monday following the U.S. Thanksgiving holiday in late November. In 2017 alone, the worldwide shopping extravaganza generated a record $6.9 billion in sales in the U.S.A. – a figure that keeps growing each year.

Origin

The term “Cyber Monday” was officially coined by Ellen Davis, then-Senior Vice President of the National Retail Federation in a press release on November 28, 2005. The decision to declare Cyber Monday an official commercial event came as a result of an announcement made by Scott Silverman, Head of Shop.org at the time. The announcement was based on 2004 research, and revealed that the day following Thanksgiving was “one of the biggest shopping days of the year.”

The term came from the observation that millions of working-class American citizens, fresh off a Thanksgiving weekend of window shopping, were returning to high-speed Internet connections at work Monday and buying what they liked. Today, Cyber Monday is observed by a mix of 23 developed and developing countries around the world such as Canada, the United States, Colombia, and Peru.

Top 5 Items Sold on Cyber Monday (2017)

• Google Chromecast
• Apple iPad
• Samsung Galaxy Tab
• Apple Airpods
• Sony PlayStation VR

Source: fastcompany.com

How Crazy is Cyber Monday?

In a word, very. Here’s a line graph showing Cyber Monday sales since its inception:

Growth has been exponential, with sales doubling from 2016 to 2017, and with the average spend hovering around $400 per person. The consumer spending can most likely be attributed to online vendors’ drawn-out marketing campaigns that advertise discounts of over 50% and generate anticipation in the weeks leading up to the big day. On a more fundamental level, Cyber Monday’s appeal comes from the convenience of shopping online and avoiding the Black Friday crowds. The 24-hour shopping window also helps with convenience, and some retailers even create multiple day-long shopping windows to keep sales up in days following the initial window.

Since the Monday following Thanksgiving isn’t a holiday, it is not surprising that 52.7% of Cyber Monday sales originated from work computers. Employers in the U.S. have been cracking down on this, however, with 7% of surveyed human resource departments having terminated at least one worker due to holiday shopping from work.

What Are the Financial Implications of Cyber Monday for Retailers?

Despite generally being a successful sales event, Cyber Monday does carry some risk for retailers. For instance, retailers will need to stock up on inventory – and carrying high levels of inventory can be very costly for a variety of reasons. For instance, storage costs will likely increase, or retailers will have to prioritize warehouse space for items that are most likely to sell. Wage expenses will also rise, as many warehouse workers will have to work additional hours in order to deal with the spike in order volume.

If retailers offer free shipping for customers, higher shipping costs will also materialize. The business will be operating at or over capacity, which increases the risk of mistakes such as wrong orders, unusually long shipping times due to a flooded postal service, or poor customer service – all factors that may dissuade buyers from purchasing from the retailer in the future. Cumulatively, the higher risks and costs combined with lower sale prices will compress retailer margins during the sale, thus requiring high sales volume to make the sale worthwhile for the business. The simplified income statement below illustrates how this phenomenon may impact an online retailer on a single sale:

Assuming that the retailer’s Cost of Goods Sold and SG&A expenses remain constant, it will need to sell upwards of six times the number of items sold at the regular price in order to see increased operating income from Cyber Monday sales. However, there are potential benefits to retailers beyond just net profits that day. If correctly estimated, the sale can be a great opportunity to increase inventory turnover and make room for new stock. A positive shopping experience may also bring customers back for another shopping trip in the future.

Top 5 Cyber Monday Retail Sites

Below are the top 5 Cyber Monday retail sites:

• cybermonday.com – shows deals from over 800 retailers and will likely show you a deal you won’t be able to resist.
• amazon.com – the world’s largest online retail platform
• walmart.com – for a variety of items at discount prices
• bestbuy.com – best deals on electronic devices
• footlocker.com – shop a wide variety of footwear

Source: cbsnews.com

Additional Resources

Thank you for reading this guide to Cyber Monday Shopping statistics. CFI is the official provider of the Financial Modeling & Valuation Analyst (FMVA)™ certification program, designed to turn anyone into a world-class financial analyst. To keep learning and advancing your career, the following CFI resources will be helpful:

• Consumer Surplus
• CAC to LTV Ratio
• Merger Monday
• Introduction to E-commerce
• See all economics resources