We hope you had an enjoyable Thanksgiving holiday, and where appropriate you took advantage of retail sales, both in-store and on digital platforms. Thanksgiving and Black Friday have already confirmed the accelerating shift toward digital commerce that is fueling our positions in Amazon (AMZN) and United Parcel Service (UPS) and, to a lesser degree, Alphabet (GOOGL) .
According to Adobe Systems (ADBE) , U.S. shoppers splurged more than $1.52 billion online by 5 PM ET on Thanksgiving, and went on to part with more than $2.85 billion for the day in full. By comparison, online Thanksgiving sales were $1.93 billion in 2016. What we found even more incredible was the percentage derived from smartphones -- a record 46%, according to Adobe.
Turning to Black Friday, according to e-commerce platform company Shopify, customers spent as much as $1.0 million per minute on the internet. Adobe says shoppers spent a record-high $5.03 billion in total on Black Friday, up 50% from $3.34 billion in 2016.
Roughly 40 percent of Black Friday online sales were made on mobile devices, marketing firm Criteo reported. Combining Thanksgiving and Black Friday sales at the 100 largest U.S. Web retailers, Adobe found $7.9 billion was spent, marking an 18% increase from 2016.
Reports for Black Friday were less favorable for bricks-and-mortar retailers, with many shoppers flocking to stores to once again showroom. For those unfamiliar with that term, it means eying items in person while waiting to do their actual bargain hunting online or via mobile. Estimates from ShopperTrak said foot traffic "decreased less than one percent when compared to Black Friday 2016."
Looking at both Thanksgiving Day and Black Friday, however, ShopperTrak found in-store foot traffic was actually down nearly 2% compared to the same two days last year. Not good for bricks and mortar at all, but with context we see it as simply more of the same, given disappointing same-store sales reported by retailers of late.
What we found most interesting in retailer comments was the growing verbiage toward digital commerce. While some may call it pandering, we see it as more confirmation of the shift we've been describing. Case in point, Kohl's (KSS) CEO Kevin Mansell shared that while the retailer delivered a "record-breaking" Thanksgiving, more than 16 million visits were made to kohls.com, outpacing any prior traffic or sales precedents.
Mansell went on to say the company fulfilled roughly 40% more orders that were bought online and picked up in stores, when compared with Black Friday of last year. Another example was J.C. Penney (JCP) , which shared that traffic at jcp.com increased at a double-digit pace throughout the week, with most shoppers visiting the site from their mobile devices. And on Thanksgiving Day, Penney's website received the most visits of any day so far this year.
Rounding out the holiday shopping weekend, today is Cyber Monday and it is expected to become the largest online shopping day in history, generating $6.6 billion in sales, up 16.5% from last year, according to Adobe. Here's the thing -- if this Cyber Monday sets a new online record, it will be the sixth year in a row the day has done so.
Stepping back, we see all the weekend's data confirming the shift to digital commerce that has been at the heart of our position in Amazon, as well as driving the search and shopping business at Alphabet and fueling the season surge at United Parcel Service.
As this shopping shift is occurring, we are also seeing Amazon build its own private-label offerings across a growing number of categories, including sportswear, electronics, and accessories to kitchenware. This is placing additional pressure on bricks-and-mortar names such as J.C. Penney and Sears (SHLD) . Of course, there is more than enough reason to think there will be even more pain on the way as traditional retail businesses are pumping up the use of discounts to win business, which should further pressure margins.
In a survey conducted by the Berkley Research Group of more than 100 high-level retail executives in October, 64% of the respondents said they expected promotions to play a more significant role in overall sales during the 2017 holidays. What this tells us is there is more trouble ahead for brick-and- mortar retail, as these companies sacrifice profits to win revenue -- not exactly a sustainable business model, and one that tends to lead to declining earnings per share.
In our view, those that lack a competitive weapon, like Amazon's Amazon Web Services or Costco Wholesale's (COST) higher-margin membership fee business, are stocks to be avoided as retailer pain continues.
This commentary was originally sent to Trifecta Stocks subscribers at 10:00 on Nov. 27.
