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Into the Black
As we head towards another frantic holiday shopping season, retailers are gearing up to cash in on the American cultural phenomenon known as Black Friday—and it’s coming to a mall or shopping center near you on November 27th. Many believe that this day receives its “black” moniker because of the general insanity that overcomes many shoppers during the onset of the Christmas season on the day after Thanksgiving. Such a theory, however, is inaccurate. The name originates from the old by-hand accounting method of using red ink to indicate a loss and black to show a gain. The sales generated on this day are said to bring retailers to the point where they have sold through enough inventory that they are now profitable for the year, and thus, have now entered into the black.
The numbers for last year’s Black Friday would appear to back such a belief. In 2008, 172 million shoppers flocked to retail stores on this day spending an average of $372 per person. These heightened expenditures ended up comprising 19.4% of total holiday sales. All these occurred under one of the worst economic skies in decades, and since the financial climate has improved somewhat in the interim, we look for each of these figures to rise considerably in 2009. The potential for both increased foot traffic and sales has not been lost on the industry’s larger players, and the race to get consumers into their respective shops has already kicked off in earnest. Here is a quick rundown of how some retail behemoths plan to do just that.
The hottest items are usually consumer electronics, with the occasional fashion must-have sprinkled in. The Nintendo Wii and UGG boots from parent company Deckers Outdoor (DECK) led the charge in 2008. While the latter company’s boots remain on the wish lists of most females, electronics should once again be in high demand as evidenced by the deals that have “leaked” online from the retail segment’s leaders.
The early buzz surrounding Wal-Mart’s (WMT) Black Friday campaign is sharp discounts on BlackBerry smartphones. Wal-Mart chains that are not already open 24 hours will begin letting customers in at 5 am and will remain open for the duration of the day. Management hopes that longer hours, coupled with new more-convenient layouts, will lead to a smoother process after the company generated very negative headlines last year when a part-time employee was trampled to death at a Long Island, N.Y. outlet.
Best Buy (BBY) may well be at the center of the frenzy due to its technological bent. This entity is slashing prices on HDTVs, laptops, and various Sony Playstation bundle packages. The idea is to pique consumer interest in their chains by having the best prices on these items and then cross sell the hottest technology items of the season, like the iPhone and iTouch, and Blu-ray players, at solid price points.
Target (TGT) is geared toward a much wider client base and will be using what is known as “doorbusters” to get people into its stores. This year’s item will be Chefmate kitchen electronics (slow cookers, sandwich makers) for $3.00. It is also boasting 50% off most toys and $15-$30 gift cards with the purchase of any iTouch.
Staples (SPLS) will be rolling out the red carpet for Black Friday shoppers looking for business and office supplies. If you purchase a digital camera, it will throw in a free photo printer. An early flier also shows 500GB hard drives at substantial discounts and 40% off all laptop bags and business cases.
Traditional retailers like J.C. Penney (JCP) and Kmart (SHLD) will not be left out in the cold in this battle. So far through all our channel checks, JCP will be playing the role of early bird when its doors open at 4 am on Black Friday. And Kmart has reinstated its previously successful layaway program, which will be a welcome offering to those consumers who remain in less-than-stellar shape following the recent recession.
All told, it appears likely that spending will improve upon last year’s weak level on this Black Friday. Now it is up to each individual retailer to grab its piece of the pie and cushion its top and bottom lines for the holiday season.