Early results from Black Friday weekend are in, and so far, they’re not pretty. While on-line sales enjoyed double-digit increases, particularly from mobile devices, overall the weekend’s sales left a lot to be desired.
Consider the following, published on this morning’s RetailWire blog, provided by Prosper Insights and Analytics:
- Overall shopper traffic for the weekend dropped 5.2 percent vs. last year
- Total Total shopping declined by 6.2 percent
- Average transaction value was down 6.4 percent from last year
- Total spending was down 11.3 percent
On the flip side, there are both pluses and minuses to be seen from eCommerce. The following data was provided by IBM IBM and Custora (full disclosure: IBM is a client of my company RSR Research, Custora is not). The data does not include Saturday or Sunday. Those results were published this morning and were consistent with Thursday and Friday.
- Thanksgiving online sales were up 14.3 percent, Mobile Sales up 25.4%
- Black Friday online sales were up 9.5 percent, up 28.2 percent
- Most importantly, just like in-store sales, average transaction value was down on both days, 1.8 percent on Thanksgiving and 4.4 percent on Black Friday
Those are a lot of bullet points, but they are telling us two things: 1) retailers likely did not recoup their investment in payroll and other in-store expenses like light and heat from their Thanksgiving openings and 2) consumers are getting savvy, and are cherry-picking items at low-prices both on-line and in-store.
“Cherry pickers” (those who buy only loss leaders) are the bane of retailers’ existence. The goal of loss leaders is to pull traffic into stores or onto web sites in the hopes that shoppers will buy additional, more profitable merchandise. Cherry pickers just buy the bargains and then leave. This should, theoretically, be easier to do online, as there’s no real physical investment in coming and going from various storefronts. The fact that it is also happening in stores is a very bad sign. It means that consumers are planning their trips very carefully, and buying only those items they’ve pre-determined are worth their while. No browsing, no impulse purchases; just buying the “good stuff.”
So why is this a problem? In all likelihood, total sales will still meet the consensus estimate of +4 percent over last year. But profits could take a real hit.
First of all, retailers pay a real premium to open their stores on Thanksgiving Day. They pay extra money for heat and light, since no one keeps stores at the same temperature when they’re closed, and retailers don’t keep that many lights on either. They pay time and a half (or even double time) to employees who work those extra shifts. That’s going to have a dampening effect on earnings.
But the far larger issue is demand uncertainty . When the season starts off slowly like this, and stores and distribution centers are filled with inventory, retailers are faced with a conundrum. Do they hold prices steady and trust that sooner or later consumers will have to finish filling their shopping lists, or do they create new incentives for those consumers to shop? Those incentives take the form of markdowns. More discounts. It’s a really tough call.
If consumers decide to play “markdown chicken” and wait until the very last minute to shop, or just buy Gift Cards instead, retailers will take major price reductions. That will also cause profits to fall.
Source: Top Stories - Google News - http://ift.tt/11JHD7g
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