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Do mega sales make a difference for BNPL companies?

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The Black Friday and Cyber Monday shopping frenzy is expected to generate a record $5.4bn in sales for Australian retailers this year in stores and online, according to new research from the Australian Retailers Association (ARA) and Roy Morgan.

ARA CEO Paul Zahra said November is now the biggest shopping month of the year in Australia, attributed mostly to the spike in sales seen over the Black Friday and Cyber Monday four-day shopping period.

“For the past two years, November has beaten December as the biggest month for Australian retail sales throughout the year. Black Friday and Cyber Monday can be credited with this trend as people snap up some bargains and shop early for Christmas,” Zahra said. “We’re forecasting consumers to spend $5.4bn over the four-day sales period. What began as an American shopping tradition has been embraced by Australians in a big way.”

Black Friday is an American tradition that has been adopted in other countries. It falls on the Friday immediately following Thanksgiving. Cyber Monday is online-only sales from digital retailers on the Monday following Black Friday.

Breaking records

Black Friday hit a new record in 2020 in the US with consumers spending $9bn, an increase of 21.6% year over year (online sales hit $7.4bn on Black Friday in 2019), according to Adobe Analytics data.

It was the second-largest online spending day in US history, coming in behind Cyber Monday 2019. Amazon took more than a quarter of the online sales on Black Friday in 2020. The day kicks off the holiday shopping season, with in-store and online shoppers searching for bargains.

According to data from e-commerce business Shopify, its merchant’s trade on Black Friday in 2020 grew by 80 per cent compared to the year prior, with 65 per cent of sales made on mobile and Australia taking the fourth spot in global sales volumes. Estimates suggest around 30% of annual retail sales are made from Black Friday until Christmas.

Last year, buy now pay later providers saw triple-digit growth from Black Friday and Cyber Monday sales.

Zip Co jumps the gun

However, Zip Co decided to jump in early this year. In October, Zip Co held Zip Fest, a four-day pre-holiday omnichannel shopping event. Zip Fest recorded a massive 130% year on year and 16% month on month increase in sales with nearly a quarter million consumers shopping with Zip for the duration of the sale. Zip Fest ranked among Zip’s best weekends ever for total transaction value, behind only Black Friday and Cyber Monday weekend last year.

PayPal describes Black Friday and Cyber Monday as mega shopping events presenting opportunities for smart retailers worldwide. PayPal highlights these days as key dates on the online shopping calendar, when millions of consumers snap up bargains as retailers watch their sales figures soar. "There’s no limit to who you can sell to or where – it’s simply a matter of knowing how to reach and convert new customers," PayPal says on its website.

Square says that if shopping is like a sport, Black Friday is the ultimate showdown and is prompting businesses to get their Black Friday marketing strategies ready, offering 12 Black Friday marketing ideas.

Afterpay US sales beat Australia's for the first time in November last year during the Black Friday and Cyber Monday timeframe. The BNPL giant said US customers jumped by 1 million to 7.5 million between October and November.

Square, which is run by Twitter co-founder Jack Dorsey, has entered into an agreement with Afterpay to acquire all shares in Afterpay, a deal that values Afterpay at around $US29bn. Afterpay shareholders will vote on the deal at the December 6 extraordinary general meeting (EGM). Square’s shareholders unequivocally backed the deal in a vote on November 4.

Retail sales higher

In the US, sales at retail stores, online sellers and restaurants rose by a seasonally adjusted 1.7% in October, compared with the previous month. In Australia retail turnover rose 1.3% in September. In New Zealand, in October, retail card spending rose 10%. Data from Singapore for September 2021 showed and 8.3% year on year rise in total retail sales, excluding motor vehicles, and up 5.1% for the seasonally adjusted month on month data. Canada was the only CMC Markets APAC region to see retail sales drop. They were down 0.6% to $56.6bn in September across Canada. But on an unadjusted basis, retail e-commerce sales were up 1.8% year over year to $3.2bn in September, accounting for 5.3% of total retail trade.

In the last week of October, Australian spending tracked 20 per cent higher than the corresponding week of 2019, according to Commonwealth Bank of Australia’s weekly credit and debit card spending data.

Inflation, shortages, regulatory challenges While there might be strong demand, prices are rising with inflation surging in many parts of the world.

Supply chain disruptions are causing delivery delays, which are being exacerbated by labour shortages. Rising inflation could eat into consumer budgets and could stymie demand.

If you can't buy what you want, gift cards have become popular and were one of the top requests for holiday season presents in a Pureprofile survey recently.

Sometimes, the shopping frenzy environment changes, too.

Alibaba Group Holding told Reuters this month that sales during its annual Singles' Day shopping frenzy grew 8.5%, the slowest rate ever, underscoring strong regulatory and supply chain headwinds for China's tech firms.

The Chinese e-commerce juggernaut said sales, or "gross merchandise value" (GMV), over its 11-day Singles' Day event rose to 540.3bn yuan ($84.5bn), compared with 26% growth last year. Sales had grown by double digits every year since Alibaba founded the festival in 2009. The event includes anything from skincare products to sports shoes, selling on Alibaba's platforms, including its Taobao and Tmall marketplaces.

PayPal (PYPL): Potential rebound at key support

Since PayPal released its Q3 earnings on November 8, the underperformance led PayPal's stock price to fall sharply, to below $200. As of November 23, PayPal fell from a high of US$309.97 in July this year to a low of US$184.28, a cumulative drop of 40%, writes CMC Markets analyst Zhujun Li.

PayPal’s poor performance on quarterly reports and challenges from competitors such as Shopify and Amazon have caused investors to worry about the growth rate of PayPal’s performance. Many institutions have lowered their target price, and its average target price has dropped from US$328.72 before the announcement of the Q3 earnings to US$276.54. Nevertheless, according to The Wall Street Journal, 74% of analysts maintain a buy rating on PayPal.

Key support: US$170

  • This position is the low point of the shock range from July to November last year and looks likely to be strong support.
  • The daily RSI indicator has continuously entered the short-oversold area, so it would have a higher probability of rebound.
  • The current price stops falling temporarily above 180. If the price can form an effective support, it is expected to have a good rebound trend. If it falls below 180, pay attention to the next support level 170.
  • If PayPal's stock price can stop falling and rebound, the first target price will probably rise to 224.13.
  • The Nasdaq Index has been weak since Monday under the influence of the renomination of Jerome Powell's as chairman of the US Federal Reserve, which brought negative sentiment to PayPal to a certain extent. But the fundamentals of the loose monetary policy environment are still there, and Powell is dovish, so the market outlook is expected to rebound, which will promote the rise of technology stocks.
  • With the upcoming Black Friday, the retail market is expected to have good results, so under the influence of sentiment, the probability of PayPal's rebound increases.


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