Mixed Signals On Black Friday Retailing

Bergen County New Jersey is home to four major malls and literally thousands of shopping options along the Route 4/Route 17 corridors. I got the impression that the stores were not seeing the kind of foot traffic I expected around midday, and that might have been due to the fact that the crowds really came out for the doorbuster sales. This report in The Record reports that the crowds really came out earlier in the day, but that's not what caught my attention.

For all the talk about recession and the economy being in shambles, how exactly are we supposed to reconcile that with a projection of sales increasing 2.2% over last year?

The National Retail Federation, however, has estimated that 128 million people would shop on Black Friday, down from 135 million last year, and will release a new estimate on Sunday afternoon.

The federation predicts that sales will increase by 2.2 percent this holiday season, the lowest increase since 2002 and half the average holiday increase of 4.4 percent. That would make this a very lean year for retailers, who have come to rely on increased sales each Christmas. Many retail analysts believe the NRF estimate is overly optimistic, and that holiday sales could decrease this year for the first time since the NRF has been tracking sales. Some experts predict a wave of retail bankruptcy filings after the holidays.

Black Friday usually isn’t the busiest day in terms of sales volume – the Saturday before Christmas is. But it’s considered an important indicator of the mood of the American consumer, the main driver of the economy.

Throughout the day Friday, shopper after shopper said they were cutting back on gifts for family members, “except for the kids.” That’s good news for executives at Wayne-based Toys “R” Us, who are banking on consumers to spend any available cash on toys and video games for children. Ron Boire, president of U.S. stores for Toys “R” Us said at mid-day that the early returns looked positive, although he couldn’t reveal specific figures. “I feel like we’re off to a good start,” Boire said. “We continue to feel pretty bullish about the toy business and Toys “R” Us in particular, and we’re getting a pretty good read on it today,” he said.

So, a 2.2% increase in sales revenue is bad news. Interesting. While the figure is the lowest increase year over year in quite some time, considering how all the pundits and experts are talking of recession, depression, and a credit meltdown, that's an incredible target figure put out by the Federation. It underlines the resilience of the markets and the pent up demand for items that people have put off. It also suggests that consumers are going to be very price sensitive and will likely flock to discount retailers over higher end retailers. That's bad news for department store chains like Macy's and Lord and Taylor's, but good news for Kohl's, Target, and WalMart.

Shopping online is the X factor in all this, and it could explain why foot traffic in stores was lower this year compared to last year. Monday is expected to be a big day for online shopping, but I think the Black Monday sales online are going to be diluted this year because many retailers were already offering those top sales to consumers as early as the Wednesday before Thanksgiving to jumpstart the holiday shopping season.

UPDATE:
I use the following sites for sales and deals:

Hot Deals Club offers year round tips and leads, but has Black Friday ads and hot deals.

Bfads.net and BlackFriday.info are both quite good at highlighting deals, comparing sales, and tracking the best sales.