Black Friday, Cyber Monday Fail to Allay Retail Anxiety

Start the conversation

Comment on This Story Click here to cancel reply.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

By Jason Simpkins
Associate Editor
Money Morning

Steep holiday discounts and bargain hunting boosted Black Friday sales, but a dour economic outlook leaves analysts skeptical that Americans will be able to sustain their buying frenzy for the duration of the holiday season.

Spending over the four-day Thanksgiving weekend rose 7.2% from a year ago to about $41 billion, according to the National Retail Federation (NRF). However, a shorter holiday shopping season and frugal shoppers could soon drive retail sales back down to their pre-holiday lows.

“Pent-up demand on electronics and clothing, plus unparalleled bargains on this season’s hottest items helped drive shopping all weekend,” said NRF President and CEO Tracy Mullin. “Holiday sales are not expected to continue at this brisk pace, but it is encouraging that Americans seem excited to go shopping again.”

The NRF continues to forecast a mild 2.2% jump in holiday sales, the smallest gain in six years.

Several details in the NRF report underscored the group’s apprehension. For instance, more than half of the 110 million holiday shoppers that braved the elements this weekend went to discount retailers like Wal-Mart Stores Inc. (WMT). Shoppers also took advantage of so-called “door buster” sales that offered products at extraordinary discounts to early morning customers.

More than 23% of the 73.6 million shoppers that hit stores Friday were in the door by 5 a.m. More than half, 57.6%, were at stores by 9 a.m.

Early-bird specials may have provided a nice boost to Black Friday sales, but offering goods at such cheap prices could backfire by marginalizing profits.

“You're looking at discounts of 50% to 70% off,” Matthew Katz, managing director in the retail practice of advisory and restructuring firm Alix Partners, told the New York Times. “You have to sell two to three times as much to break even.”

Retailers cannot continue to offer shoppers such steep discounts, and consequently, will find it difficult to keep their attention. That is especially true this year, as thrifty consumers have taken a more targeted approach – swooping into stores for the things they want and retreating without taking the time to browse for additional items.

“Shoppers definitely have a mission this year,” Marshal Cohen, chief retail analyst for NPD Group, told CNN. “They are serious about finding the best deals. They are very budget conscious, they've done their research and then they'll go home.”

Also, this year’s holiday shopping season is five days shorter than last year. Consumers have just 27 days to shop this year, as opposed to 32 in 2007.

Analysts will get another glance into the psyche of the American consumer tomorrow (Tuesday) as sales data emerges for “Cyber Monday,” the unofficial kickoff of the online holiday shopping season.

Initial results showed a 2% increase in online sales over Thanksgiving and Black Friday, and the NRF said it expects another 84.6 million people to take their bargain hunting online Monday. According to a Nielsen Online survey, 36% of consumers will spend half of their shopping budgets on the Web, up from 32% last year.

Internet vendors are prepared for the online rush by offering discounts of their own, as well as free shipping, to potential customers.

The NRF’s eHoliday Survey showed that nearly 84% of online retailers will offer a special promotion on Cyber Monday, up from 72% last year. Nearly 39% of online retailers plan to offer specific deals, while 33% will offer e-mail campaigns and 25% one-day sales. About 23% will offer free shipping on all purchases.

“Online retailers have been planning their Cyber Monday promotions for months and are eagerly waiting to debut these deals to shoppers,” said Scott Silverman, executive director of Shop.org, an online division of NRF. “As shoppers focus on price this holiday season, online retailers will be extremely competitive to offer the very best deals. Americans who are looking to put a dent in their holiday shopping will be able to find thousands of bargains on Cyber Monday.”

Of course that’s not to say it will be any easier for online outlets to draw a crowd. Consumers may be planning to spend a greater portion of their budgets online, but overall those budgets have shrunk.

For the first 23 days of November, holiday online spending reached $8.2 billion, a 4% decline compared to the corresponding days last year, when online sales hit $8.5 billion, according to online marketing research firm, comScore.

"There was an optimism going into the holiday season that online would weather the storm a little bit better," Jessica Ried, associate director of research for Resource Interactive, an online-marketing consultancy told TIME magazine. "But this year in November we've seen the first online sales decrease ever.”

“I don't know that this is the only prediction to go by,” Ried added, “but a dire prediction from an organization as big as comScore does give retailers pause."

News and Related Story Links: