Rafi Mohammed

Black Friday...Blue Light Holiday Season

Posted on November 29th, 2007 (0 Comments)

With Black Friday, the day after Thanksgiving when retail stores historically start making profits (the previous 11 months of sales covered expenses) and the Thanksgiving weekend sales figures are in, the big question is how does the upcoming shopping season look?

Black Friday and the ensuing Thanksgiving have turned into the retailer’s worst nightmare – ultra competitive. This year, many stores opened at midnight on Friday (late Thursday night) because others were doing so. Really, why would you want to open your store at midnight? The answer: no one wanted to miss a selling opportunity. Last year, Wal-Mart blamed its disappointing holiday season on the fact that it had not offered steep discounts earlier in the season…so consumers didn’t think of Wal-Mart as the low price leader for their holiday shopping. Learning from this lesson, discounts were plentiful this year…again, not because retailers wanted to, but they didn’t want to miss an opportunity. Even I, a notoriously late shopper, couldn’t resist a 60% discount off a Sirius portable radio. As consumers, we all benefit from this vigorous competition for our spending dollars.

Though I’m seeing the same numbers as everyone else, my conclusion is different than other analysts'. Friday’s sales were up 8.3% and Saturday’s sales were up 5.4% compared to last year (according to ShopperTrak RCT Corp). While promising, the average amount spent by shoppers fell by 3.5% to $347.44 (according to the National Retail Federation). Additionally, consumers were flocking to discount stores like Wal Mart and Best Buy, not high-end chains like Nordstrom and Abercombie & Fitch.

Sales are up, average spending is down…translated, this means more customers were out shopping for bargains. This indicates consumers are price sensitive – they came out in droves for bargains. In more flush times, price isn’t as important and we all don’t have to jump through the hurdle of waiting in line for morning specials.

I’m not trying to be a curmudgeon, but it’s hard to be optimistic about our economy these days. Consumers’ real wealth is decreasing due to the housing market crisis and an uncertain stock market. Goldman Sachs has raised the odds of a recession from 30% to between 40% - 45%. A survey of consumer confidence released yesterday dropped from 95.2 (October reading) to 87.3. Not a great scenario, don’t you agree?

While not the best selling environment, price is going to play a more prominent role in driving sales this season. My prediction: retailers are going to offer steeper discounts to achieve flat to moderate growth. And with thinner margins, it’ll be hard to maintain profitability this holiday season.

Not every season is going to be better than the last. But the right pricing strategy is the answer for retailers and as consumers, we stand to benefit from low prices. Stay on the lookout for those discounts!

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