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Another Black Friday. Another holiday shopping season.
But a whole new strategy for U.S. retailers.
As the Friday after the Thanksgiving holiday, today marks the "official" kickoff of the 2010 holiday shopping season. Usually referred to as "Black Friday," today is the day when U.S. retailers traditionally pull out all the stops in an effort to pull as much money as possible out of the wallets and purses of U.S. consumers.
But after two of the most painful holiday shopping seasons in memory, U.S. retailers aren't just falling back on the same old tired bag of tricks - they're aiming to "swarm" shoppers into submission with striking early-bird store schedules, attention-grabbing smartphone technologies and intriguging attempts to combine the convenience of online shopping with the sensorial allure of brick-and-mortar browsing.
"Retailers are trying to be in front of customers 24/7," said Noam Paransky, a retail strategist at Kurt Salmon Associates. "It's exploding this year."
A Shopping Season Forecast
The National Retail Federation has predicted holiday sales - with today (Friday) as the starting point - will hit $447.1 billion during this year's shopping season, a 2.3% increase from last year. That's a bit below the average annual increase of 2.5% for the past decade, but it's still a step in the right direction: Holiday sales increased a minuscule 0.4% last year and actually plunged 3.9% in 2008 - thanks to a financial crisis that some at the time feared would turn into a Great Depression II.
"Consumers have endured two years of economic body blows, but have been slowly picking themselves off the mat since last year, despite the employment woes," Craig Johnson, president of retail consultancy firm Customer Growth Partners, told CNNMoney.
Retail sales have shown signs of life of late: Monthly results have increased in four of the last five months, while the closely watched same-store-sales results have risen for 14 consecutive months, with the biggest shopping months of the year yet to be tallied. November and December provide as much as 50% of some retailers' yearly profit and sales.
Some stores have hired temporary help to better serve the holiday rush, while others are offering employee incentives for extended working hours.
"What retailers have learned from the difficulties [of the last two years] is the need to be meaner, leaner, and also, to get more out of the help that they already have,'' Mike Tesler, a partner with the Norwell, Mass., consulting firm Retail Concepts, told The Boston Globe.
Understanding that there's a limit to the total amount consumers will spend - and wanting to lure cost-conscious consumers away from competitors - discount and big-box retailers such as Wal-Mart Stores Inc. (NYSE: WMT) are rolling out their most aggressive sales campaigns.
"Consumers are shopping with their brakes on," Candace Corlett, president of retail consulting firm WSL Strategic Retail, told CNN. "They are sticking to stores they can afford and [that] fit their economic situation."
Wal-Mart is matching competitors' prices on Black Friday, hoping to entice customers away from cheap deals at such rival discounters as Target Corp. (NYSE: TGT). Customers who present ads for lower-priced products will be able to buy at the lower price at Wal-Mart.
In order to compete with online-only retailers - such as customer favorite Amazon.com Inc. (Nasdaq: AMZN) - brick-and-mortar chains are offering free shipping from their Websites to appeal to those consumers who prefer to avoid the in-store Black Friday frenzy.
But for those consumers who this year were willing to venture beyond their computer keyboards to hit in-store deals, it wasn't necessary to wait until after the Thanksgiving family feast.
That's because the new holiday strategy truly calls for retailers to "swarm" U.S. shoppers.
"Black Friday" Becomes "Black November"
In order to get shoppers primed and ready to spend early, "Pre-Black-Friday" sales started earlier than ever this year - some as soon as Halloween. Electronics specialist Newegg held a "Black November" retailing campaign - complete with month-long deals, daily specials and free shipping.
Now, even more chains, including privately owned Toys "R" Us Ltd., are opening on Thanksgiving Day. The Gap Inc. (NYSE: GPS) opened about 75% of its Old Navy stores last year and will open 90% this year due to the "tremendous" results it enjoyed in 2009.
Kmart Corp. has opened its doors on Thanksgiving Day for 19 years.
This year marks the first year that Sears Holdings Corp.'s (Nasdaq: SHLD) Sears, Roebuck and Co. stores planned to open on Thanksgiving - the day before Black Friday.
"Last year, customer response to our 'Black Friday Now' deals was overwhelmingly positive, and many were thrilled that they did not have to wait for holiday deals," Sears Senior Vice President David Friedman said. "This year, we wanted to extend these deals to two days to help our customers get the best quality gifts for the ones they love - without breaking the bank."
While Sears insists its customers have requested the extra shopping hours, some analysts are skeptical the tactic will help boost the chain's drastically declining sales. Sears reported a third-quarter loss that tripled from the year before.
Retail analyst Brian Sozzi of Wall Street Strategies called it a "desperate" move.
"Who is going to be at Sears on Thanksgiving?" Sozzi asked.
Other stores will offer online deals on Thanksgiving but continue to reserve a closed-door policy for the holiday.
"Somebody else is chasing a dollar? Let 'em do it," Kohl's Corp. (NYSE: KSS) Chief Executive Officer Kevin Mansell told The Wall Street Journal. "I think our associates, and frankly our customers, deserve time with their families and that's what Thanksgiving is about."
Why It Pays To Be a Tech-Savvy Shopper
The online marketplace expects to see more growth than in-store shopping as customers opt for convenience and spend more time researching deals online. Online research firm comScore Inc. (Nasdaq: SCOR) predicted online sales will go up 11% this holiday season, while eMarketer.com estimates that online holiday sales will rise as high as 14.3% from last year. Online sales will represent about 10% of all holiday shopping.
"Holiday shopping is ideally suited to the internet," said eMarketer.com principal analyst Jeffrey Grau. "Consumers appreciate the convenience and product selection online, as well as the abundance of resources available for finding good deals, especially for cost-conscious shoppers trying to weather the tough economy."
But this year's holiday shopping experience goes beyond online buying and price hunting. Retailers are now trying to use technology in innovative ways to transform the traditional brick-and-mortar shopping experience into a more interactive and exciting event, while offering deals and coupons as incentive.
"It's about making it easier for customers," said Bridget Trask of Convergys Corp. (NYSE: CVG) retail products group. "The buyer has a lot of choices. It's hard to compete on just prices any more."
One new tool involves integrating an online shopping experience with the in-store one. Instead of asking the sales associate to check another store for an item, some stores like Saks Inc. (NYSE: SKS) are setting up their cash registers to take online orders. The sales associate even gets a commission for placing the order.
Other retailers like J. C. Penney Co. Inc. (NYSE: JCP) and Kohl's are setting up in-store kiosks to let customers order products online when they run out on shelves.
Facebook.com launched a "Deals" program, allowing customers to use their smartphones to "check in" when they get to a store and access discounts and coupons, as do mobile applications like Shopkick and Foursquare. A recent Foursquare deal with Gap sent a 25%-off coupon to shoppers who checked in at Gap stores.
Other stores are letting shoppers scan bar codes with their smartphones - not only to find the product's price, but also to read online reviews and to compare prices from competitors. Besides encouraging consumers to spend, the integration of Internet and smartphones into holiday shopping is creating a more informed consumer who is likely to be loyal to the most convenient and tech-friendly merchants.
"Online consumers have become savvy at finding coupons, comparing prices, locating cheaper product alternatives, and exchanging shopping tactics and information about bargains with peers through social media," said eMarketer's Grau. "Online retailers with product-selection guides, easy return policies, and friendly and accessible customer service representatives put shoppers at ease and turn them into lifelong customers."
Besides Consumers - Who Will Take the Black Friday Crown?
While an impressive or dismal Black Friday performance will affect a retailer's profit - and morale - the holiday shopping season is far from over.
"[Black Friday] does matter," said Morgan Stanley (NYSE: MS) analyst Michelle Clark. "It'll set the tone for the rest of the holiday season. But you still have the rest of the season. You have to have strong December sales as well. Price is important, but product newness is also key."
So who is positioned for a strong kick-off?
While big-box behemoth Wal-Mart is aggressively pursuing a big holiday shopping season, some analysts are skeptical it can successfully win back customers from competitors. The discounter reported last week that U.S. same-store sales at stores opened at least a year declined for the sixth consecutive quarter.
Best Buy Co. Inc. (NYSE: BBY), on the other hand, has piqued analyst interest going into the holiday season. The electronics giant offered some of the most popular Black Friday deals, including a $189.99 Toshiba Satellite 15.6" laptop and $50 off a Barnes & Noble Inc. (NYSE: BKS) NOOK eReader, now at $99.99. As holiday sales become increasingly tech-driven, Best Buy nudges its name closer to the top of shopper's favorite stops.
"They are the ones that have to be in front of the marketplace," Stephen Baker, an analyst with NDP Group, told MarketWatch. "They are the first player when people think of consumer electronics."
Barclays PLC (NYSE ADR: BCS) this week raised its price target for Best Buy to $51 per share. The stock closed at $44.81 Wednesday.
"Over the past year, Best Buy has repeatedly characterized the consumer spending environment as episodic and we think that will work in its favor over the holidays," wrote analysts from Barclays. "During this time, we think an abundance of new products, share gains, and positive margin trends will enable the company to achieve solid results, which could push estimates higher for this year and next."
Analysts are predicting 12.7% earnings growth in the quarter ending February 2011, although some feel that is low and the company will shoot higher with holiday sales.
Best Buy does face competition from Internet stalwart Amazon.com. The popularity of Internet shopping has been incredibly kind to the online retailer, and hard-to-beat deals have stolen customers from Wal-Mart and Target. ComScore estimated $32.4 billion will be spent on online holiday shopping, and Amazon.com should see a nice chunk of that.
Amazon.com is "the best play off the secular growth in online retail," and the stock is worth of a "material market premium," analyst Mark S. Mahaney of Citigroup Inc. (NYSE: C) told Bloomberg.
Citigroup maintains a "Buy" rating for the stock and a $190 price target. Amazon.com shares rose $9.05, or 5.38%, in trading Wednesday to $177.25 in anticipation of the hot holiday shopping weekend.
Finally, Barclays announced this week as the time to buy luxury retail stocks. Analysts are predicting a 5% to 5.5% increase in fourth-quarter sales for both Saks and Coach Inc. (NYSE: COH). Same-store sales were up 8.1% at Saks in October, and Coach has surpassed revenue expectations in eight of the 10 previous quarters.
Tiffany & Co. (NYSE: TIF) sales are expected to grow only 2%, but it has a price target of $64 from Barclays. Tiffany closed at $61.33 on Wednesday and has surged 42% this year. The luxury store reported third-quarter earnings this week showing a 27% rise in profit.
But those who don't come out on top after this weekend can still make plays for consumers who are finally opening up their wallets after a couple years of slim spending.
"No one (retailer) can afford not to play on" Black Friday, UBS AG (NYSE: UBS) analyst Roxanne Meyer told MarketWatch. "But the season is far from over. You can't call the winners yet."
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News and Related Story Links:
- The Boston Globe:
Small holiday perk
- The Wall Street Journal:
Black Friday Creeps Into Thanksgiving
Black Friday deals hitting a fever pitch
- Kurt Salmon Associates:
- Customer Growth Partners:
- Retail Concepts:
- The Associated Press:
Holiday shopping battle starts to get pitched
Bright Picture for US Online Holiday Sales
- NDP Group:
Retailers prep for sales frenzy
- WSL Strategic Retail:
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