Frances Woolley is a professor of economics at Carleton University, where she teaches public finance. Her recent Economy Lab posts can be found here.
What Canadians search for on Google reveals what they are thinking about. Right now, it's "Black Friday."
Six years ago, searches for Black Friday made up a miniscule fraction of Google's Canadian search volume. But since 2009, Black Friday searches have exploded each year at the end of November. (The accompanying graph documents this trend, and also shows the limitations of gauging interest in a topic from google searches. Rebecca Black's viral hit "Friday" caused a surge of "Black Friday" searches earlier this year.)
A number of academic studies have investigated the Black Friday phenomenon. A recent study in the International Journal of Retail & Distribution Management argued that Black Friday is a time for people to come together; a time to strengthen family ties. As the authors put it:
"This study's data clearly show that the family bonds together in the face of perceived adversity (i.e. survival in the competitive shopping environment) during Black Friday consumption rituals. Thus, Black Friday appears to be one means for multiple generations of females to bond together, reinforce relationships, and indoctrinate younger generations."
The family that shops together, stays together?
Another study, this one published in the Journal of Marketing Research, examined the impact of Thanksgiving dinner on shopping behaviour. Turkey contains tryptophan, which increases the amount of serotonin in the brain. This, the researchers found, actually decreases impulsiveness, making people less likely to jump at bargains. It's an interesting theory -- and may explain why Black Friday shoppers plan their days with military precision, scouring flyers for discounts on goods they really want.
These studies might shed some insight into Americans' obsession with Black Friday. But what motivates Canadians to go south for the day and join the party? For most of us Black Friday shopping isn't a long-standing family tradition, and we haven't been gorging ourselves on deep fried turkey.
Cross-border shopping just comes down to the cost of travel versus the benefit of lower prices. A recent study by economists Ambarish Chandra, Keith Head and Mariano Tappata estimated that a typical shopper requires savings of almost $30 per hour of travel time. So, for example, a six-hour round-trip journey is worth doing if it generates savings of $180 or more.
Their results imply that the people who live closest to the U.S. border are the ones most likely to go cross-border shopping. An analysis of Google searches shows the same thing: right now the place in Canada where the most people are typing "Black Friday" into their search engines is Windsor, Ont., followed by Saint John, N.B. In British Columbia, Coquitlam, Burnaby, Richmond and Surrey are the places where people are most likely to be searching for Black Friday specials.
If people shop in the U.S. because it's cheaper, as Chandra, Head and Tappata's study suggests, then a strong dollar explains Canadians' growing interest in Black Friday. Indeed, these authors estimate that a 10 per cent rise in the value of an already strong loonie would be expected to generate a 24 per cent rise in cross-border shopping.
Yet while all of this is good news for Canadian consumers, it's tough on Canadian retailers. Economists Jen Bagg, Eugene Beaulieu, Loretta Fung and Beverly Lapham have examined the impact of a rising dollar on Canadian retailers. They found that, in the past, a rising loonie has meant retail firms saw a fall in sales and profits, especially ones near the U.S. border (study here.)
Canadian retailers know all this, and they're fighting back. Black Friday sales are coming North -- so Canadians, too, can form family bonds through this collective consumption ritual. Personally, I'm going to give the competitive shopping environment a miss… but then again, there are some great on-line sales.
Follow Economy Lab on twitter