What is Black Friday?

Black Friday is the day after the US thanksgiving holiday, marked by heavy retail activity. It is the unofficial beginning of the holiday season in the country and across the globe as huge discounts are given on this day.

Thanksgiving holiday in the US is on the last Thursday of November. Thus, the following day has come to be known as Black Friday. This day is a crucial day for many shop owners and retailers as they see heavy inflow of shoppers.

Cyber Monday was later introduced in addition to Black Friday where customers could avail discounts on online shopping on various websites. It is the Monday after Black Friday. It was initially introduced to encourage people to shop online. As more and more businesses are moving online coupled with digital marketing, higher sales are being observed on e-commerce platforms than on physical retail stores.

Why is it called Black Friday?

It is believed that Black Friday was given its name due to the heavy inflow of profits on this day. As customers flocked to the shops, shopkeepers recorded unusual profits and started calling them “black”. The term black is also sometimes used to refer to profits as black because they would mark profits with black in their book of accounts and losses with red.

Thus, on Black Friday, shops can “move into the black” or make enough profits so that prices can be reduced for the customers. Anticipating high sales, many shops offer heavy discounts on their products. These discounts end up attracting more buyers.

However, this is only one part of the story as it is believed that the actual origin of the term came in 1950s when the police started referring to the day following Thanksgiving as “Black Friday”.

What is the history of Black Friday?

The term Black Friday was earlier associated with the crash of the US gold market which happened on the 24^th of September 1869. This happened after two investors tried to buy all the gold in the market to increase its price only to sell it later when prices were to rise. However, their strategy was revealed, and markets came crashing. Therefore, the day came to be known as the Black Friday. However, over time the term developed a new meaning.

In the 1950s, police used the term Black Friday to refer to the chaos and mania that ensued amongst the shoppers on this day. People used to flock the stores a day in advance to buy items on a discount. Many a times, fights would break in stores and this would give rise to shoplifters taking advantage of the situation. Also, people from different regions would drive down to their local stores or to stores far away that had higher discounts. This often led to large gatherings and huge traffic on the streets.

All these factors led to the requirement of law enforcement in major cities in the United States. Police officials had to work extra shifts to manage the crowds, and they could not take leaves too. Shoplifters added to the mayhem and led to the requirement of more security management. Thus, the term Black Friday was given a new meaning.

Why has the term evolved over time?

Over time, many retailers tried to remove the negative connotations behind the term since Black Friday was used to refer to the chaotic situation caused by consumers. Therefore, it is believed that retailers tried to change the origin story of the term and thus, the theory about the ‘red and black’ accounts came to light.

However, the true story is still believed to be the one given by the police in the 1950s. The police accounts in Philadelphia are believed to be the origin story behind the name.

Why is Black Friday important?

Black Friday is the unofficial beginning of the holiday season. Many shopkeepers expect greater profits on the day and money is expected to flow into the economy. Consumer confidence also increases, and the stock market is also driven by the Black Friday event.

It is a known fact that there is increased liquidity during and before Christmas and New Year celebrations. Since Thanksgiving is an official holiday, followed by Black Friday, it makes for four days for consumers to shop for the holidays. This positive sentiment is translated into the stock market too. As companies expect greater profits during this time, their stocks tend to gain value as well. This sets the expectations of investors too.

Black Friday sales are also used as a benchmark to analyse the health of the economy. Many investors use Black Friday sales as a tool to judge how well the retail sector is doing. If the profits on Black Friday are less than expectations, then it is estimated that the economy has slowed down. On the contrary, if expectations are exceeded, then it means that the economy is performing better than anticipated.

Black Friday is also important because the U.S. stock market is closed on Thanksgiving. Thus, profits to businesses coming from the holidays are translated only a day later. Stock markets are also expected to show greater activity before the weekend. This makes Black Friday even more important for the equity market.

Black Friday has progressively become an online event. With the emergence of major ecommerce websites, most retail transactions happen virtually. Thus, Cyber Monday was introduced as a supplement to Black Friday.

Cyber Monday is especially important because companies offer discounts online and not on the physical stores. This is a much better method of providing discounts as there are lesser chances of people getting hurt or any law enforcement getting involved.

In times of the pandemic, firms should offer greater online discounts rather than a sale on their physical stores. It is expected that people would avail greater discounts virtually rather than driving down to stores.