Why the Black Friday retail boom was a nation defining event

The incredible Black Friday retail boom was a nation defining event that ranks with the referendum in explaining the remarkable trends taking place Down Under.

It is unlikely that the Reserve Bank researchers bunkered in Martin Place in Sydney had any idea of the magnitude of what had just taken place when they briefed the board this week. The chances of a December interest rate rise would have been greatly enhanced had they known.

Yesterday I revealed the spectacular but approximate 13 per cent overall rise in Australian retail sales during the Black Friday period as part of my coverage of the powder kegs facing the Australian government.

The approximate average increase was so high that it required further research to determine exactly what happened.

I discovered that the dramatic event divided top retail managers. Some understood this current Australian market and achieved sales rises well above the average — 20 and 25 per cent increases were achievable. Some stores went higher.

But nothing prepared WA retailers for Black Friday in the west. Sales jumps were two or three times the rises achieved in equivalent stores in eastern states. Australia is now two nations——the WA bonanza and the rest. Back to eastern states, retailers and many languished, and they will blame the economy rather than their out of touch top managers. Other retailers are still celebrating. From what I can determine among the national majors, Myer was an outstanding performer. More of that later.

Big crowds turned up in Melbourne during the Black Friday sales. Picture: David Crosling/NCA Newswire

Let’s start with who was buying and who was not. Naturally, absent from the big Black Friday buyers were those under severe rent and mortgage stress. But those in the top income and prosperity brackets — the yes voters in the referendum — were also missing. Perhaps the event was beneath them.

In their place was the mass of “ordinary Australians” most of whom voted no in the last referendum. (The children of the prosperous and many other younger people joined “ordinary Australians” in spending, but they bought different items.)

Most active buyers owned a dwelling. It might be mortgaged, but they were managing the payments. Most importantly, their dwellings were at worst holding their value but most enjoyed increasing values, despite interest rate rises. This maintenance/increase in dwelling values in the face of higher interest rates is taking place because there is a housing shortage. But it is providing a deep inner confidence among a vast number of ordinary Australians.

If anything happens to substantially reduce dwelling prices, that confidence will be destroyed, and we will suffer a very severe downturn. The Reserve Bank needs to understand this.

Australians no longer have any faith in Reserve Bank statements, and they don’t think inflation is about to fall significantly, so it’s better to buy now rather than pay much more later.

And Black Friday was an opportunity to obtain the goods they wanted at an attractive price.

And that buying spread from suburban stores to rural areas, but naturally there were spots of weakness in areas where there was severe rent or mortgage stress.

Among the big buyers were the tradies who are making a fortune in the current environment because there are incredible shortages, and they are selecting the most profitable jobs.

They know better than most that energy costs, labour costs and state government charges are spiralling out of control. Again, it makes sense to buy goods now.

For retailers to participate in the Black Friday event, it first required a fundamental decision by the top managers to harness all their marketing skills to craft their bricks and mortar and online strategies to capture the excitement of the event.

Those that simply marketed in the normal way and did not understand the nature of the Black Friday vibes missed out.

It tended to be a big retailer event and many of the “high street” small shops also missed out, especially as Black Friday is both a store buying and online event.

It’s hard to determine at this early stage just how big the online content of Black Friday was, but for many stores it was substantial.

I am sure that in picking out Myer I am bypassing many stores that performed equally well.

Myer chief executive John King has gathered a management team that brings incredible experience from the UK and top executives’ CVs include mention of Marks and Spencer, the House of Fraser, Selfridges and the online winners such as ASOS and Matalan.

One of the advantages boosting the better retailers is that it is now possible to send their top buyers to China instead of dealing via third parties. And those buyers found Chinese suppliers anxious to deal with Australians so they could get the right goods at the right price.

The Black Friday winners believe that their knowledge of ordinary Australians is second to none, and they believe customers will be back for Christmas and Boxing Day. And of course at Christmas the affluent will join the buying.

Nevertheless, it is reasonable to speculate that spectacular increases during Black Friday may not be repeated in Christmas/Boxing Day sales, but trade will still be very strong for those retailers who understand their customers.

Meanwhile, markets should prepare for retailers who didn’t have the skills to tap the Black Friday boom to cry over the bad side of the economy rather than confess their failings.