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A Shift In Consumer Spending Habits

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This Holiday Season has shown a shift in consumers’ spending habits, largely influenced by the increased reliance of mobile phones. Shopping holidays such as Thanksgiving, Black Friday, Cyber Monday and the week leading up to Christmas, are now influenced by the e-commerce trend. Consumers find online shopping more practical, to avoid long lines, crowded parking lots, and a trip to the store all together.

Instead of just a single day of lining up and shopping with discounts, retailers (such as Target, Wal-Mart, and others) this season started Black Friday and Cyber Monday a few days early, giving consumers who wanted to shop these deals more time to make purchases. Retailers have even encouraged this year to open discounts online several hours before offered in store.

According to the Deloitte 2015 Holiday Survey, consumers planned to spend 12.5% more over the holidays, and of that 12.5% consumers who shop online planned to spend 75% more than those who went to stores. Overall, according to MasterCard SpendingPulse, e-commerce sales rose 7.9% this year. Even the products people are buying online may seem surprising. For example, sales in online furniture and home and garden supplies grew.

The shift to online shopping can be largely attributed to an increased dependency on mobile devices. According to data from International Business Machines Corp., mobile shopping accounted for about 57% of online shopping transactions. One of the main reasons for this switch is convenience. Mobile has made it easy for consumers to shop quickly, cheaply, and on the go, while also not having to worry about the additional stress about not finding the product you want or waiting in line at the store.

In our blog in November, we discussed Facebook and mobile advertising and said, “The shift to mobile advertising, sparked by a migration to smartphones over laptops, is growing as companies realize this is the fastest way to target consumers. Mobile advertising has also been influenced by brands who are demanding more mobile space as they move to more of an e-commerce model.” We believe that the switch to mobile advertising also impacted this season’s holiday shopping.

It is also important to look at how delivery services are changing their methods in order to keep up with new trends. UPS, for example, as a result of increasing online sales, spent $500 million last year to hire more employees and to work directly with retailers to forecast package volumes. UPS also approached the new holiday season with a more disciplined approach, pulling delivery dates forward to prevent backed-up orders.

Overall, the e-commerce trend will allow companies to work together, generating a larger amount of revenue at the end of the season.

Ideal Asset Management’s Take:

The trend of consumers shifting away from brick and mortar retailers to online shopping will have far reaching effects across the stock market. Traditional retailers may see their stocks struggle to find traction given this trend. Companies that benefit from this trend including Amazon (Nasdaq: AMZN), Fedex (NYSE: FDX), and UPS (NYSE: UPS), may be worthy of your portfolio if this trend continues.

 

 

Disclosure:

All of the ideas expressed in this article are the opinions of Ideal Asset Management LLC
Ideal Asset Management currently owns shares of FDX for its clients
Before trading on any of the information in this article, consider consulting your financial advisor to make it suits your financial goals
All investments carry the risk of loss

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