Black Friday sales are going to start earlier on Thanksgiving eve this year. Fierce competition is pushing retailers to try to gain market share by luring consumers even earlier with steep discounts.
“Fourth quarter for every major retailer is everything. We make more earnings-wise in the fourth quarter than we make in the first three quarters combined,” Terry Lundgren, CEO of Macy’s said in a recent talk, showing just how important the holiday sales are for retailers. “We work so hard 12 months of the year and if you are not really good between Nov. 20 and Dec. 27 you’re dead.” According to JP Morgan and Deloitte, the Black Friday weekend itself makes up 25 percent of November store sales and about 10 percent of total holiday shopping ($706 billion).
Macy’s is one of the retailers, which is starting Black Friday in-store sales from midnight Thursday. Wal-Mart is starting even earlier at 8 p.m. Thursday to first capture the business of millions of shoppers. The National Retail Federation estimates that as many as 147 million shoppers will either shop online or in-store.
“They are still trying to be competitive, they always have been and always will be, no matter how the economy is. They just have to become more creative by really overstepping that boundary, being open on Thanksgiving,” says Christy Vogel, CEO of Marketing Direction, a company that hires out marketing executives to small- and medium-sized businesses.
“A lot of retailers, large and small have been offering their Black Friday discounts as early as last week,” she says, explaining that many retailers she is in contact with weren’t sure what discounts they should provide. According to the response they got from consumers, they would adjust their pricing for the holiday sales. “It was more on the sly, it wasn’t marketed as Black Friday pricing last week,” says Vogel.
Aggressive Move Due to Uncertainty
Vogel thinks that retailers made the move to start even earlier than Black Friday this year due to uncertainty over the consumer’s buying power.
“With the economy people are really watching their dollars and on average a Black Friday shopper is going to spend about $400 over the weekend, so [retailers] are trying to get as many of those $400 into their pockets.” By providing discounts early, they hope to get ahead of other retailers that open later, inducing consumers to do their complete shopping with them.
According to Vogel, retailers still made most of their sales on the Saturday before Christmas in 2003. Because they wanted to have more clarity on final year sales and profits, they started to shift the holiday season discounts to earlier in December and then November. “By firing up those discounts and drawing more shoppers in in the month of November you’re able to tell a little bit better how your year-end is going to be,” says Vogel.
But have conditions really gotten so bad that retailers have to start the buying frenzy on Thanksgiving, a traditional holiday? Some consumers are certainly becoming more and more sophisticated and harder to tempt with only price.
“I am not sure what is coming up. I have most of the things I want,” says Alexander Kok, a business analyst with French bank BNP Paribas who works in New York.
He represents the type of consumer that does his homework to then strike with pinpoint precision when a good deal comes along. Using this method, he was able to make great savings on a desktop PC during last year’s sale on Newegg.com.
“I wanted to buy a computer. So I did some research before the sales started and then when actual deals came up, I was able to select the things I actually wanted to get. You don’t want to take too long and miss a good deal. You don’t want to buy things just because they are cheap; you want to buy them because you need them.”
He said he noticed that Black Friday was starting early this year and said he will take a look online, but hasn’t planned any store visits.
Economic Data Suggests Consumer Can Still Spend
What about hard and fast numbers? JP Morgan still expects same store sales for most of the major retailers to post a decent gain compared to last year. Sales in Macy’s stores that are open for more than 12 months should grow 1.5 percent, the same for Kohl’s. Nordstrom is expected to achieve a 4 percent increase.
Some retail executives got the jitters when October retail sales numbers were released, as they went down 0.3 percent compared to September. Looking at a longer time series however, this is merely a small dent in a steady uptrend.
Recent job data has also been strong. The U.S. Bureau of Labor Statistics reported a healthy gain of 171,000 jobs added in October. As a result, consumer confidence has been high as well. The University of Michigan survey reached its highest point in five years Nov. 9.
Christy Vogel cites rising credit-card sales as an indication that consumers will spend “a little more than last year.”
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