Holiday Off to Encouraging Start

Discussion
Dec 01, 2008

By
Tom Ryan

According
to ShopperTrak RCT Corp. and the National
Retail Federation, sales on Black Friday and over the weekend came in better
than expected given the overall sorry state of the economy and consumer
confidence. The results were driven by early openings, numerous door-buster
specials and deep discounts overall.

According
to ShopperTrak, sales on Black Friday rose three percent to $10.6
billion. While
significantly lower than the 8 percent gain last year and the smallest since a
decline of 0.9 percent in 2005, the results were still described as "encouraging."

"Retailers
truly experienced what we’ve dubbed the ‘perfect storm’ over the last few
weeks, with the financial markets melting down, the presidential election
which typically slows retail traffic and relatively high gasoline prices – all
of which slowed both retail traffic and spending," said Bill Martin,
co-founder of ShopperTrak, in a statement. "Under these circumstances,
to start off the season in this fashion is truly amazing and is a testament
to the resiliency of the American consumer, and undeniably proves a willingness
to spend."

While
calling Black Friday an "encouraging start," Mr. Martin noted
that there’s no guarantee the deep discounts will continue after Black
Friday weekend to drive sales. Another challenge for the overall holiday
season for retailers is that consumers have 27 days to shop this year as
opposed to 32 in 2007, "which may catch some procrastinating consumers
off guard, leading to lower sales levels."

According
to the NRF’s 2008 Black Friday Weekend survey, conducted by BIGresearch,
more than 172 million shoppers visited stores and websites over Black Friday
weekend, up from 147 million shoppers last year. Shoppers spent an average
of $372.57 over the weekend, up 7.2 percent over last year’s $347.55. Total
spending reached an estimated $41 billion.

Friday
saw 73.6 million people hitting stores and websites. The survey found that
23.3 percent of shoppers were at stores by 5 a.m. while 57.6 percent were
at stores by 9 a.m.

Another
56.9 million shopped on Saturday, up from 48.3 million last year, while
another 26.2 million people planned to shop on Sunday. On Thanksgiving
Day, 16.2 million people shopped versus 10.9 million the prior year.

"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, in a statement.
"Holiday sales are not expected to continue at this brisk pace, but
it is encouraging that Americans seem excited to go shopping again."

Discussion
Questions: How would you rate Black Friday’s performance? Were stores
overly promotional? How should stores adjust to keep up the momentum
for the rest of the 2008 holiday season?

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18 Comments on "Holiday Off to Encouraging Start"


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Camille P. Schuster, Ph.D.
Guest
13 years 5 months ago

The promotions and advertising worked. More shoppers came out and spent more money. That was definitely encouraging in terms of sales, not so encouraging for profits. Consumers appear to be watching their money carefully, found good discounts, and spent accordingly.

Now we will see what happens on Cyber Monday–do the sales continue? And what about the rest of the month? Was the surge on Friday because people knew what they wanted, found a good deal, and made their purchases or was it because they were ready to shop when the deals came along or was it because they plan to shop for Christmas as usual? I’m not convinced that it is Christmas as usual.

Doug Fleener
Guest
13 years 5 months ago
One of my national retail clients put it simply: “Friday business was terrific and Saturday awful.” A poll of our Daily Retail Experience newsletter subscribers (who are almost all specialty retailers) was all over the place. About 1/3 said sales and traffic was up this weekend, 1/3 said sales and traffic was flat, and a 1/3 said sales and traffic was down. While I’m encouraged that the weekend numbers were better than expected, my concern is the NRF survey found that only 36% of the shoppers visited a specialty store compared to 43.2% last year. That is a 17% decrease! I thought it was interesting that drop wasn’t noted in the NRF press release. It would appear that aggressive discounting by the department stores siphoned off those shoppers. The survey found that 43% of consumers shopped department stores this year versus 38.7% last year, and there was very little change in the percentage of shoppers who shopped a discount store this year (54.7%) versus last year (55.1%). I believe that specialty retailers will need to… Read more »
Don Delzell
Guest
Don Delzell
13 years 5 months ago
At the risk of becoming anecdotal, I too visited several retailers over the weekend. While the initial crowds were similar to last year, my observation was that not only were they down, but as the day wore on, the traffic thinned markedly. By Saturday evening, stores that were still busy last year were ghost towns this year. A 3% increase, assuming that is what actually occurred, would NOT be a positive sign. The year to year comparison required that there be a significant increase as a result of the calendar shift. Traditionally, for several mass merchants, the Thanksgiving weekend is worth 15% more in total volume when it occurs this late in the month. Obviously 3% doesn’t quite reach that historical average. As far as promotions go, yes, there were deep and compelling discounts on some of the destination categories. However, it was not across the board, and I do not believe that everyone participated in the sell-off. Target, as an example, was at best as promotional as last year, and may, after a comparative… Read more »
Mike Mohaupt
Guest
Mike Mohaupt
13 years 5 months ago

I find these results extremely encouraging and intuitively somewhat expected. This is a consumer driven economy and I do not believe that promotions were the big driver. Without going into individual category price elasticities–I struggle with the notion that price got consumers to buy. Price may have made consumers trade off one retailer for another but the purchase desire was still there. Given that the poor economy is based on a credit crunch and fear of job loss people shopping for purses etc would not make much sense and yet they did.

Now I say intuitively because I agree with the earlier comment–there is too much bad press about the economy these days and much of it is hearsay lacking facts.

Long live the consumer!

Craig Sundstrom
Guest
13 years 5 months ago

Hot on the heels of the Walmart Stampede Death thread we have yet another Black Friday thread; is it possible we make too much of this singular day? Nah….

But anyway, my own observation–admittedly anecdotal and from the other side of the counter (from many of the other commentators here)–is that every year we have one of two holiday season scenarios: either the “starts out well and then peters out, leaving retailers disappointed” option, or the “starts out slowly but rallies in the end, leaving retailers pleased” one; as it has started well, we apparently are headed for the former. I offer my condolences.

Bonny Baldwin
Guest
Bonny Baldwin
13 years 5 months ago

I work the sales floor for a major department store. This past weekend I saw something that scares me at least as much as a lack of consumer confidence. I saw very confident consumers scoffing at “only” a 40% discount, and assuming they could negotiate the price on last week’s shipments! This can’t be good.

John Gaffney
Guest
John Gaffney
13 years 5 months ago

Yes, retailers were overly promotional. Forget the short-term strategy, this was a three-day binge. Retailers now need to follow this act, and the only way most will do it is to drop prices even more. I would like to see retailers make the Thanksgiving weekend a more cross-channel event. Maybe the entrance to Black Friday sales events depends on a VIP pass printed online. Maybe the in-store purchase promises more loyalty points for purchases made online in 2009. There are a lot of innovations I just don’t see.

Gene Detroyer
Guest
13 years 5 months ago
The numbers surprise me. On what should have been a “Grid Lock” day in New York City, sidewalks were less crowded than on most days. For several weeks we have been discussing on this site the aggressive promotional plans that anxious retailers were implementing. Not only were they starting the holiday season prior to traditional start dates, they seemed to be going deeper in price offerings. From the numbers I have seen so far, I do not believe any of that pre-season activity did anything but cut margins. While the numbers for Friday appear on the surface to be encouraging, consider that 23% of all the shoppers were at the stores by 5AM. Consider, more than half of the shoppers were in the stores by 9AM. Those two statistics make the entire shopping day an anomaly and in no way suggests that the rest of the season will be even moderately strong. An extraordinary number of shoppers on Black Friday dramatically changed shopping patters for some reason. The solid bet is that they were motivated… Read more »
Mark Burr
Guest
13 years 5 months ago
Quite honestly, based on predictions far and wide that the sky was falling, there should be celebrations this week due to the completely ‘unexpected’ sales increase of 3%. Three percent is good. Not great, but good. Good is okay. Fuel prices are down substantially, discounting has begun much earlier, if not built into initial pricing. Consumers are seeing good trends. For the overwhelming percentage of the population, the so-called crisis, has had no impact. In fact, none. What is having an impact is that they are spending anywhere from $50-$250 less per month in gas. My guess is that as that continues to impact their budget in the coming week, sales will improve overall even more. Further, as they continue to see that the so-called ‘crisis’ is not affecting them, they will regain confidence and move beyond the fear instilled by daily reports. I predict that Christmas will occur exactly on December 25th and consumers will share gifts. It will happen.
Raymond D. Jones
Guest
Raymond D. Jones
13 years 5 months ago

This early result may just indicate that shoppers are even more sensitive to deals this year. My guess is if you look behind the numbers, you may see that they were driven by big screen TVs and other items that consumers were lured to buy because they finally came down far enough in price.

The total holiday season is still likely to be down, particularly because there are 5 fewer shopping days this year than last. And profits will be slim due to the heavy discounting.

Cathy Hotka
Guest
13 years 5 months ago

The hype around Black Friday sales has been breathtaking this year, particularly among organizations that want to get their names in the paper at any cost.

Consumers remain deeply concerned about their financial security, and retailers have responded by slashing prices. I bought a gorgeous cocktail dress over the weekend for $7. It would be foolish for observers to mistake Friday’s bargain-hunting frenzy for a harbinger of a strong holiday season.

Ryan Mathews
Guest
13 years 5 months ago

The question is, “Is concern over the economy the source of Black Friday sales?” If the answer is yes, then what we’ve seen is that the retail industry has once again proved that you can sell a good deal of merchandise on discount, but that that’s not necessarily the best strategy for driving profitable volume.

Doron Levy
Guest
Doron Levy
13 years 5 months ago

I don’t have any hard numbers in yet but it looks to me like we really had some big and aggressive sales on Friday. A few of my friends in the grocery biz down in Florida have reported long cash lines, empty endcaps and rapid seasonal sell through. My initial reaction is that we are selling through on loss leaders and weak margin items.

In summary, we are selling stuff and the numbers show that but what about profitability? Are we actually making any money? I’m not sure I want to hear the answer.

Dick Seesel
Guest
13 years 5 months ago
I think we all need to take anything reported by the NRF with a grain of salt, since they are usually the most optimistic forecasters going into every holiday season. It would be helpful to see some data reported by credit card companies, but in a year when people are using more cash the numbers may not be useful. So the 3% increase may be the best information available right now. If that’s the case, retailers should be encouraged that they drove traffic into their stores and websites on Friday, and nobody should be surprised that it took deep discounts to make it happen. This is not a trend that started in 2008 and it’s not going to end when the economy improves. The challenge from Saturday onward is to continue driving traffic into stores since Christmas is now only 3 1/2 weeks away. Yes, stores are going to be highly promotional but there is little choice but to drive top-line sales and to drive down inventories by the end of December. If retailers come… Read more »
Max Goldberg
Guest
13 years 5 months ago

It’s not surprising that retailers drove consumers into their stores using promotions and deep discounts. Consumers have been waiting for the “real sales” to begin. It will be interesting to see if consumers keep shopping or wait until just before Christmas, when retailers might have to deeply cut prices again to bring in buyers.

Marc Gordon
Guest
Marc Gordon
13 years 5 months ago

Encouraging start? Not compared to last year based on the statistics provided. I would also wonder how many people went further into debt in order to take advantage of all those bargains.

I think the real test will be how retail sales go between now and Christmas.

Bob Phibbs
Guest
13 years 5 months ago

The malls I visited in the early part of Black Friday were as full as I’d seen them and would support the 3% increase mentioned by ShopperTrack. Yet in some morning papers today, an analyst from Wachovia says his employees “fanned out” and found traffic off by 25%.

Anecdotal remarks like these only make our jobs harder. If you have retail clients who had any increase in traffic or sales this past weekend, do us all a favor and get their story to the local press.

Ted Hurlbut
Guest
Ted Hurlbut
13 years 5 months ago

Given the recent reporting in the press about the state of things, the fact that the sky didn’t actually fall, as predicted, is a step in the right direction. I may be an optimist, but I think it’s very possible that the season will not be as bad as many seem to fear. Black Friday and the rest of the weekend may be an early indication of that.

Having said that, the levels of discounting was somewhat breathtaking. Top line sales may actually come in better than expected, but profits are likely to be hammered nevertheless. But right now, for many retailers the name of the game is cash flow, and getting through the coming months to fight on in 2009.

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