The “News” Is Good – But At What Cost?
Early reports from Black Friday and the remainder of the post-Thanksgiving weekend seemed positive enough: “The holiday shopping season got off to a better-than-expected start” said The Wall Street Journal; “Consumers swarmed the nation’s stores over the weekend… giving retailers a little Christmas cheer” said the Washington Post. But beneath that cheery exterior are some realities that should give retailers pause. As The New York Times reported, “The bargains that drove shoppers to stores were so stunning, analysts said that retailers — already suffering from double-digit sales declines the last two months — would probably see their profits erode even further.”
Market research firm ShopperTrak reported that sales on Black Friday grew 3 percent to about $10.6 billion. Last year, sales on that day grew 8.3 percent. The National Retail Federation (NRF) said that about 172 million people have shopped in stores or online since Thursday; in a survey of 3,370 shoppers, NRF estimated shoppers spent an average of $372.57 over the weekend, for a total of roughly $41 billion—a 7.2 percent increase over the same weekend last year, when about 147 million shoppers spent $347.55 per person. And research firm ComScore reported online sales on Thanksgiving Day and Black Friday grew 2 percent from last year to $822 million.
However, ComScore also said sales this holiday season are down 4 percent from last year. ShopperTrak has predicted a 10 percent decline in mall traffic this holiday season and a meager 0.1 percent increase in overall sales, both record lows. An NRF spokesman acknowledged that “people were putting off a lot of purchases, waiting for the best deals, knowing that retailers would obviously reward them.”
And reward them they did, with “door-buster” deals and heavy discounting, some of which started as Black Friday deals earlier in the week. Retailers reeled in cautious shoppers with massive discounts like “buy one get one free” sweaters at Gap Inc. stores, $200 iPod Touch music players from Amazon.com Inc., and 26-inch LCD TVs at Target Corp. sites for $299. Yet even as unprecedented discounts lured shoppers into stores, momentum ebbed Saturday; NRF reported traffic trailed off by more than 16 million people on Saturday, and most retailers indicated that Saturday and Sunday traffic did not hold up anywhere near Friday’s. This raised concerns that shoppers were merely exploiting the “door-buster” deals and then walking out of stores. Other research sources confirmed that consumers bought only deeply discounted items. Analysts told The New York Times that the discounts that drew in shoppers over the weekend were so steep that many ailing chains might be no better off in the long run, with discounts of 50 to 70 percent off meaning retailers have to sell two to three times as much to break even.
The promotions came on top of already radical price cuts, with many retailers having switched early this year to marking down and moving though the inventory. According to Shop.org, this heavy discounting was to continue right through Cyber Monday (December 1st). The result is that profit margins will surely suffer. The question is, will any additional traffic make up for the long-term harm that’s being done?
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F. Curtis Barry & Co. works with multichannel businesses to increase catalog profitability through the evaluation and implementation of order management systems, inventory management systems, warehouse management systems that match client objectives.
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