A responsible investing perspective on the biggest shopping day of the year

By David Rutherford

The excessive consumption of the last Friday in November, known as “Black Friday” because it’s when a bevy of promotions and discounts help put retailers in the black, has big implications for responsible investing. Black Friday is now a global phenomenon. What’s particularly striking about Black Friday 2020 is how it sharpened the divide between large and small, dominant and upstart, big-box and local retailers.

We’ve said it before and we’re saying it again: COVID-19 is making the strong stronger. When Black Friday rolled around this year, it played out very differently for big global retailers and struggling small businesses. In Manitoba and Ontario, renewed restrictions on in-person shopping forced many small businesses to close their doors or switch to curbside pickups. So where can consumers go to get their fix of retail therapy? To the big retailers, or directly online, which is dominated by, yep, the big retailers.

The New York Times recently reported on the phenomenon. “Retailers have experienced a stark split in fortunes during the pandemic. The mass shutdowns this spring fuelled big-name bankruptcies and thousands of store closures.” As dominant retailers become more dominant, small businesses — often considered the backbone of the Canadian economy — will continue to struggle. The Times also observes that “the strong like Amazon and Walmart have only gotten stronger and more profitable, driven by their online businesses and ability to supply everything people need while stuck at home, from food to electronics.” Perhaps not surprisingly, Amazon is currently on a massive hiring binge and the company’s stock price has skyrocketed almost 80% since mid-March.

The beauty of having to shop online to stay safe is that consumers didn’t have to wait until Black Friday to get the door crasher special. Almost 60% of Americans began their Black Friday shopping in early November and, despite the economic fallout of the pandemic, are poised to spend more this year than last. In Canada, the majority of consumers expect to spend “the same or less” this year, according to a holiday shopping survey by PwC. Most of that revenue is going into the pockets of the big players like Walmart and Amazon. Which means they’re getting stronger at the very point in time when issues like income inequality, employee safety and excessive executive compensation are becoming more pronounced than they’ve ever been.

At NEI, we’re actively engaging with companies on these and other ESG issues. But it’s challenging to engage with companies that are so completely dominant in their fields. This year, we have seen companies of all stripes slip back from their earlier progress around transitioning to a multi-stakeholder model that strives to serve the needs of many stakeholders including employees and communities, in addition to  shareholders.

And perhaps transition is the wrong word. More and more, it feels like what was first viewed as a sea change was actually more of a reactionary response to COVID-19. Granted, it’s hard to gain traction on a new way of doing business at the best of times.

But it’s even harder to adjust your focus to long-term goals that consider all stakeholders when there’s so much money to be made in the short term by doing business as usual. In a competitive landscape weakened by COVID-19, it may just be too hard for the dominant players to resist. Black Friday, indeed.