Two days ago we reported that according to a troubling – for retailers – survey conducted by Reuters/Ipsos, nearly two thirds, or 63% of US adults, did not plan to shop on Black Friday. It is unclear what exactly is causing this sharp slump in US consumerism: according to Christopher Baldwin, CEO of BJ’s Wholesale Club, one excuse is that “Black Friday is no longer a one-day event; it has turned into a multi-week event.” Another possible reason is that shellshocked by soaring Obamacare premiums, US adults simply have far less disposable cash which to splurge on holiday trinkets.
Confirming the pessimistic outlook on this holiday’s spending season, Reuters reports that according to its own spot checks as well as those of reporters and industry officials, “store traffic remained subdued across the country.”
“Initial reports show it’s steady and not very busy at stores around the country,” said Craig Johnson, president at retail consultancy Customer Growth Partners. The firm deployed 18 people nationwide to observe customer traffic. Rain hurt shopping at stores in the Northeast, Johnson said, but some retailers like Best Buy and Wal-Mart saw improved customer traffic at stores across the country.
At a JC Penney store in Manhattan, Terry Bodiford, visiting from South Carolina, said he did not feel deals were better than he had found online over the past few weeks.
Macy’s and Best Buy on Chicago’s Magnificent Mile were packed, but employees said most of the customers were tourists.
The lack of enthusiasm is troubling.
As Bloomberg reports, a perpetually optimistic National Retail Federation projects that about 137.4 million consumers will make purchases in stores or online over the four-day weekend that starts on Thanksgiving. The amount Americans have spent has declined in the last three years, slipping 26 percent from 2013 to an average of $299.60 per person last year, according to the trade group. To be sure, at least superficially, there should be good news:
By most accounts, this holiday season is expected be a boon for retailers. Unemployment, gasoline prices and inflation are low, while wages, home values and the stock market continue to rise. Shoppers have the wherewithal to spend, and now retailers are hoping the holiday season will give them a reason to. Companies such as Kohl’s Corp., Gap Inc. and Barnes & Noble Inc. have said the U.S. presidential election was a major cause of consumers’ recent reluctance to open their wallets. With the outcome settled, they’re expecting the dollars to finally flow.
Oh yes, the “I don’t know who will be president so I won’t buy that TV excuse.” It was laughable when it first emerged, and it is even more laughable now that contrary to expectations, Americans are failing to unelash their purchasing animal spirits. Maybe now they are worried about Jill Stein’s recount?
And yet, nothing will dent the NRF’s optimism, which expects that U.S. retail spending is expected to rise 3.6 percent to $655.8 billion in November and December as “retailers are poised to take full advantage of the Thanksgiving holiday period, now known by some as Black Week, which accounts for about 15 percent of holiday spending, according to the trade group.”
What is even more troubling is that physical retailers have made every possible concession to consumers to get them through the door and spend, spend, spend.
J.C. Penney will open its doors at 3 p.m. on Thursday to reach shoppers before they tuck into their Thanksgiving feasts. EBay Inc. is trying to push the selling even earlier: It rebranded the day before Thanksgiving as Mobile Wednesday, using discounts to target traveling Americans. The sales will stretch through the weekend, with online and brick-and-mortar companies offering deals for Cyber Monday.
Investors are confident that the retail industry will see strong sales. The Standard & Poor’s 500 Retail Index has risen 4.9 percent so far in November and is on pace for its best monthly return since July. Retail stocks have outpaced the broader market since the U.S. presidential election, with the index up 4.7 percent since Nov. 8, compared with the broader S&P 500’s 3 percent rally. Historical studies indicate that elections affect the timing of retail sales rather than the overall volume, said Jerry Storch, CEO of Saks Fifth Avenue owner Hudson’s Bay Co.
“Hopefully, when we get to Black Friday, which really tolls the bell of holiday shopping, then the consumer will start looking forward to Christmas,” Storch said.
Indeed, while actual revenues may be lacking, optimism is prevalent as retails hope that finally US consumer will beging spending. “That would be a welcome development for merchants that have yet to see a sales bump materialize. Dollar sales in the second week of November were 8 percent lower than in the same period a year earlier, according to research firm NPD Group. The decline was broad-based, too, with drops in apparel, toys, technology, athletic footwear and perfumes, the firm said.”
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However. what appears to be yet another year of pain for traditional, bricks and mortar retailers, will likely result in further gains for online vendors.
According to Reuters, Chicago’s State Street, a normally bustling shopping area popular with locals, was desolate. Shaun Smith, a 29-year-old restaurant manager, said he only came to the State Street store to take advantage of a deal for a $279 Westinghouse TV which is normally priced over $600. “I will buy most of what I need online,” he said.
“If Amazon had everything, like everything you need in the world, I would buy everything from there,” said Oscar Viral, a 58-year-old chef in New York. “I wanted something from Macy’s, and I got on the Internet because they didn’t have it available in the store.”
Confirming this, moments ago Amazon.com reported that Black Friday is already on pace to surpass Black Friday last year, in terms of items ordered, adding that In first few hours, Amazon customers have ordered >100k toys. Alexa devices are some of the best-selling items on Amazon.com so far today, including Echo Dot, Fire TV Stick with Alexa Voice Remote. The company also adds that Instant Pot 7-in-1 Multi-functional Cooker, Hasbro’s Pie Face Game, WeMo Switch Smart Plug (Works with Amazon Alexa) and Sennheiser HD 598 Headphones also among best- selling deals today.
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Amazon is just one of many alternatives: for shoppers who are ready to spend, they have more ways than ever to do so, with retailers including Wal-Mart Stores Inc. and Amazon.com Inc. offering exclusive deals to customers who download their mobile applications. Non-store sales may increase 7 percent to 10 percent this year, reaching as much as $117 billion, according to the NRF. Online sales account for the bulk of this measure, the group said.
Online spending by U.S. bargain hunters climbed to above $1 billion by Thanksgiving evening, according to Adobe Digital Index, surging almost 14 percent from a year ago and reflecting a broader trend away from brick-and-mortar shopping. At the start of the first holiday shopping season since the election of Donald Trump as president on November 8, U.S. consumers loosened their purse strings and spent $1.15 billion online between midnight and 5 pm ET on Thursday, according to Adobe. The Adobe figure is collected from 21 billion online visits to 4,500 U.S. retail sites since Nov. 1.
“We saw one of our strongest days ever online,” Brian Cornell, chief executive of discount retailer Target, told reporters on Thursday evening. He added that online sales grew by double digits, without giving further details.
“Online discounts are earlier and a lot bigger than last year,” said Tamara Gaffney, principal research analyst at Adobe Digital Index.
While the surge in online spending is unmistakable, the question is whether the 7-10% increase in online sales to $117 billion will offset what is shaping up to be another tepid holiday season for traditional retailers. If so, with the election now behind us, we wonder just what the next “latest and greatest” excuse used by retail CEOs will be on Q4 conference calls should the always delayed rebound in US spending fail to materialize yet again..
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