Monday Morning Quarterbacking Black Friday

American Express did more good for independent bricks and mortar stores with their Small Business Saturday than the SBA has in years. It is a model of an incredible social media campaign that “got it right”–some comments on RW earlier notwithstanding.

While we may not be out of the woods yet and many disgruntled media writers are touting high inventories and expected “greater discounts” the reality is America is regaining confidence in spending across channels and that is a very good thing.

The metrics for Black Friday are notoriously difficult to gauge, with the NRF report of a 6% sales increase over the weekend especially hard to swallow. (Retailers are optimists by nature, and the NRF is no exception.) The continued growth of e-commerce sales and the earlier openings (including Thursday) make the raw numbers reported in brick & mortar stores on Friday hard to use as a benchmark for the season. And anecdotal evidence (like crowded parking lots and customers with shopping bags) is no substitute for raw data. Add in the fact that Black Friday is traditionally dominated by margin-busting categories like electronics, toys and small electrics.

Retailers need to provide flavor for weekend sales today or (more importantly) they need to report November comp sales before anybody can draw conclusions about the nature of the holiday season. I still expect to see the sort of modest increases for the holiday season that happened during Back to School — there is nothing in the macroeconomic picture that would turn this season into a barn-burner.

Here is some (early) insight from our retailers:

– Stores who got behind Small Business Saturday seemed to do quite well. One local retailer doubled her Saturday business from the year before. By the way, AMEX has extended this promotion which should be a win-win for independents and AMEX.

– Our independent retailers definitely were more profitable this year. Last year they felt they had to have aggressive pricing on Black Friday weekend, and this year they scaled the discounts back. I really think that having the Small Business Saturday to promote made it easier for them to do.

– We’ve been most surprised that our Florida retailers did quite well with stores being up between 25% and 65% up for the weekend.

– One group that didn’t do as well as last year were the outlet stores. Over the last couple of years the outlet malls midnight madness sales have been quite successful, but now that Walmart and others are doing them it definitely hurt sales and traffic.

– Even the retailers who were disappointed they didn’t see the increase they were hoping for are optimistic about the rest of the year. Consumers were definitely buying more for themselves which we believe will benefit the specialty retailer.

It’s always great to celebrate a broad-based jump in revenues, particularly with all the grim news. I don’t mean to sound like a Grinch (although everybody should stick to what they’re good at), but the basic fundamentals haven’t really changed. Housing is still a mess, unemployment is high and beginning to appear intractable, and household savings rates continue to rise.

With all the discounts, extended hours, etc., there is a strong possibility for another “U-shaped” holiday pattern, where there is a big jump on Black Friday, followed by 3 weeks of giving the gains back, and a big jump towards the end as the deals get more desperate. One key indicator is sales of gift cards, used after Christmas when the discounts begin in earnest.

The key statistic to watch is sales in the coming week. If they stay strong, we should have a very good holiday performance. If not, not.

All indications are that, despite 9.6% unemployment, those who are employed are a little more secure with what they have, especially since savings have been way up. Secure to the point, slightly deprived to the point, whichever, it looks like we’re going to have a more ‘normal’ Holiday spending season.

Many merchants who are still giving away the farm will soon realize the above and start to take more advantage of this increased appetite and promote quality ahead of price. Those who don’t will be caught in the price war indefinitely and will have to compete like savages (vs. brand merchants) throughout 2011 until they either have the same epiphany or go out of business.

It’s going to be an interesting year!

I agree with some other posters that a strong start does not guarantee a strong finish (even good “Cyber Monday” numbers today will not ensure good sales through Dec. 24) and high traffic isn’t always an indicator of strong individual purchase behavior.

However, what is clear is that retail marketers have turned Black Friday into a national holiday arguably more embedded in the public consciousness than Thanksgiving. Also consumers who used to complain about how early Christmas promotions began now look forward to holiday displays in September. The early marketing of Christmas from an awareness and public acceptance standpoint is a huge success, let’s see if it translates into profits.

I don’t think it was so much what the retailers did differently that caused a surge in consumer traffic and sales. I think it is simply that people are tired of being depressed, tired of cutting back, tired of not being able to afford “new things.” We are a consumer society, and what makes most Americans happy is the opportunity to consume.

The retailers have trained the shopper to anticipate large price reductions for the post-Thanksgiving shopping weekend. Consumers saved up in anticipation, bought less leading up to the holiday, and then with cash in their pocket, and pent-up demand, surged to the stores for holiday bargains. In essence it was the perfect storm; pent-up demand, available cash and credit, and great bargains. That is what makes for a profitable Black Friday, and we saw great results this year.

Let’s see what happens over the next 4 weeks, and whether or not this spending can be sustained.

First, I just have to say, I absolutely loved the Target commercials–they were a total scream! That being said, I didn’t go to Target. In fact, for the first time, I avoided even observing Black Friday. I did observe the only traffic spotted in my resort town and that was at Walmart. Go figure.

Beyond Friday, I ventured out on Saturday. During the day, my impression was traffic was indeed up. Statistically, I think that likely bears itself out in the reports. My observance was however captured in a word–bagless. As I strolled among the crowd, it was the most common thing I noticed. Lots of folks–no bags.

The inconsistency in reports from the two sources on sales is interesting. Since ShopperTrak is on real purchases, I tend to think it’s likely more accurate than a ‘survey’. Interestingly, the spread between traffic and sales is nearly exactly the same. People are looking.

My interpretation is that consumers will buy slightly more or about the same as last year. Their purchases in some areas will be different with trends in gift cards and electronics maintaining slight growth.

I see consumers right now as pensive. They will spend, but will do so with care and thought. That’s not a bad thing. It may even be something that retailers can build growth on. However, with likely close to 20% real unemployment, fuel pricing threatening, uncertainty in taxes and cost of living, consumers will enjoy, but with care. Sensible.

In line with some of the other comments, even with the last minute radio blitz on small business Saturday, without knowing a single participant it was hard to ‘check it out’. Had I known, or if it would have been easier to know, I might have stopped in a retailer or two even without an AMEX card.

My outlook is that we won’t go backwards. We won’t be going forward with gusto either. Neither is bad. Considering our present circumstances, not going backwards is a real gain. And, 0.3 percent is a real gain. The 6.4 percent? Nope, didn’t see it. There would have been more bags!

I was very happy that many smart retailers promoted “value” rather than dirt cheap pricing. Of course the usual brain dead retailers tried to out-do Walmart with deep discounting and that’s almost always such a bad way to go.

I doubt if the increased length for “Black Friday” offers increased total holiday spending among American consumers beyond preseason projections. Despite the increase in spending across traditional (FSIs/TV/Radio) and digital media (email/sponsorships/social), I imagine the 2-3% NRF projected lift will hold.

Additionally, I think it is crucial to check back on earnings as many retailers aggressively embraced off price promotions (sales, coupons) to drive sales.

All that said, this first weekend will show “share” shifts from outlet to outlet.

I think a more interesting question to be answered is: What share of consumers will forsake the “new normal” return to the “old normal” and spend beyond their ability to repay the credit card company?

That is the needed consumer behavior for sales to spike beyond 3%.

The stage was set on Friday morning sometime between 4-5am. Retailers worked hard on providing strong deals and consumers responded. I was outside a Staples in Connecticut at 5am and over 250 people were lined up before the doors opened at 6am. No question, people were focused on deals, but you could look in everyone’s basket and find more than one item that was not a door buster.

Consumers have held back on spending (whether they wanted to be or not) for the last 2 years. It is clear that regardless of the tough times people want to spend and they will. This won’t be a record breaker, but the 2010 holiday season will be remembered as the one that surprised everyone with stronger than expected sales.

Hate to be the “Grinch” but in the end I feel strongly that total holiday spending will end basically flat. The reality is that disposable income has not increased for the vast majority of Americans. Jobless rates and unemployment claims haven’t significantly improved and commodity prices have continued their upward creep.

I believe we’ll see that the majority of Americans spent their holiday budget early, during the black Friday/Cyber Monday time frames, in order to maximize the value of their dollar during this heavily advertised and discounted period.

Holiday sales nearly always disappoint and despite high hopes by the soothsayers, will likely repeat last year’s dismal performance.

Here’s another spin on traffic being up 2.2% and volume up .3% from 2009 (depending upon the numbers you’re using): this Black Friday with its deep discounting and 24 hr mania is another installment of a gyrating business model hoping to revive the consumerism of a system that is unalterably different. An economy built on 50 – 70% consumer activity (again, who’s numbers?) fueled by obscene debt and driven by narcissistic compulsion is about played out.

Unemployment, peak oil, QEII, rising commodity and energy prices, falling real asset (estate) values, stagnant wages and income, and an increasing awareness of environmental degradation and resource depletion are transforming the economy. When merchants offer 40% discounts on everything and are using a keystone, margins get cut 80%; that, and a dramatically overbuilt physical capacity mean there’s a shakeout coming with far reaching implications. This party is over.

But, there will always be opportunities for astute operators who fill real needs that contribute to the quality of life. Trying to coax more vacuous consumption out of our citizens isn’t the answer.

Our sales were up too. However, with the small profit margins we are operating with (competition is dictating our pricing), we still eat beans three times a day.

We are thinking of writing a cook book for retailers full of creative bean recipes:

* Gourmet Cooked Beans…for high profit margins/high sales.
* Survival Cooked Beans…for small margins/high sales.
* Plain Cooked Beans…low sales with slim profit margins.