November: Black Friday Weekend: The IronMan of Shopping
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If there were to be a shopper's equivalent of the IronMan, recognized as one of the most grueling triathlon events, we might have just experienced it last weekend. The winner who shattered all previous records is the U.S. consumer, clocking over $11.4B during Black Friday and another $1.25B over Cyber Monday.
To be fair, the U.S. consumer did receive years of coaching from retailers on how to take advantage of deep discounts and sales events. And this year, retailers went one step further by opening their doors earlier than ever and staying open as late as they could to give even the late runner a chance to cross over the finish line. The question is: Will they continue to shop over the holiday season?
Macroeconomic conditions appear to forecast positively by showing signs of improvement:
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Nine consecutive quarters of GDP growth (2% annualized at end of Q3 2011)
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Unemployment fell to 8.6%
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Consumer confidence indices trending up
- Rising personal consumption expenditures and falling savings rate indicate that consumers are beginning to open their wallets
- Overall comps were positive, although there was some weakness in specialty and department stores
Add to these indicators the recent success of Black Friday and Cyber Monday, and it's tempting to forecast a strong holiday season. But, historically, Black Fridays and Cyber Mondays have been poor predictors of holiday performance.
The truth is, consumers have grown into strong athletes on their own. Gone are the days when they fell prey to impulse purchases. They have grown more and more savvy, organized, and disciplined in their shopping. Equipped with a shopping list and an array of online and mobile price comparison tools, they home in on the best deals offered to them—wherever those may be.
Expect holiday to be stormy. For retailers, success depends on how well they connect with their consumers. Unfortunately, most retailers will do so through heavy promotion and at the expense of their margins.
What can retailers do to protect their margins?
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Carefully evaluate any last pushes from DC's to stores. Ensure that allocations are being sent to stores with highest potential sell-through, and not to stores that already have enough to make it through Christmas.
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Rebalance product across stores. Although store transfers are expensive, sometimes they are necessary. But act immediately: next week is likely the last chance to initiate and use ground shipping rather than air.
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Prepare for day-after-Christmas clearance. Review any plans for post-holiday clearance activity, particularly any plans to advertise/promote.
- Update floor presentations. Challenge the status quo. Even slight changes can provide higher visibility to slower selling and/or overstocked items.
Finally, will the retailers host another Ironman leading to Christmas? Competing in another week-long shopping marathon has its own added cost in terms of both store labor and additional promotions. For certain, the printers are getting paid pretty well from additional costs of print media. And as for the retailers, the heroin is in their veins; they have felt success from Thanksgiving, they are enjoying the rush, and they have likely pulled the trigger on running additional promos. What we wonder is: Who will break the ice first and be open Christmas Day?
And, as always, our complete data pack of retailer and macroeconomic data is attached. Follow this link to download the AlixPartners Comp Sales Report for November 2011.
For comments and additional information, please reply to: retail@alixpartners.com