Nov. 24, 2009, 5:32 p.m. EST · Recommend · Post:
Retailers jostle for Black Friday business
Balancing profit-eroding promotions against much-needed traffic
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AlertEmailPrintShare By Andria Cheng, MarketWatch
NEW YORK (MarketWatch) -- In Manhattan's trendy Soho district, Gap Inc.'s Old Navy chain has a prominent window sign telling shoppers it's open for business on Thanksgiving Day. Across the street, the British retailer Topshop promises early birds a free English breakfast Friday morning.
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In fact, while retailers like Sears Holdings Corp. (SHLD 71.06, -0.60, -0.84%) have been touting their holiday-season offerings since as early as summertime, and industry behemoth Wal-Mart Stores Inc. (WMT 54.85, +0.17, +0.31%) unfurled a Black Friday-style promotion a week early, the jostling will come to a climax Friday with the official kickoff of the industry's most critical period. It's called Black Friday because it's the date on which retailers are traditionally expected to become profitable for the year.
Against the backdrop of a still-struggling U.S. economy marked by a 26-year-high jobless rate, retailers from Target Corp. (TGT 47.46, +0.20, +0.42%) to Best Buy Co. (BBY 42.85, -0.86, -1.97%) are opening their doors earlier than ever or making sure their highest-profile specials, from the $3 slow cooker at Target to the $197 Hewlett-Packard (HPQ 50.19, -0.83, -1.63%) laptop at Best Buy, are enticing and competitive enough to drive traffic to their stores and set an upbeat tone for the season. Wal-Mart has emphasized in its ads that it will match prices in any local competitor's print ad.
Plan of attack
"You have to make your plan" for Black Friday weekend, said Barclays Capital analyst Robert Drbul in an interview, adding this weekend can be expected to generate 10% of total holiday season sales. "It's hard to play catch-up. A lot of what you are seeing [in terms of store promotions] is surgical and tactical. It's well-planned."
While one day doesn't a season make, Black Friday, as has been the case for several years, is again expected to be the No. 1 shopping day by both foot traffic and sales, generating 6% of the season's turnover, according to the store- and mall-traffic tracker ShopperTrak. And members of about 26% of all U.S. households plan to shop on Black Friday, up from 24% in 2007, according to a survey by the International Council of Shopping Centers and Goldman Sachs.
"It's my single biggest day of the year," said Jim Fielding, president of Disney Stores Worldwide (DIS 30.23, -0.25, -0.82%) , in an interview, adding that Disney is opening more of its stores at midnight and has done more advanced media and publicity work this year to promote the opening. "This year it's a more proactive campaign. All retailers are looking at maximizing the traffic."
According to the National Retail Federation, a trade organization, as many as 134 million people, 4.7% more than last year, will shop this Friday, Saturday or Sunday.
Reuters
Shoppers at Glendale Galleria mall in Glendale, Calif., on Black Friday, 2008.
Making the weekend's sales even more crucial is survey results indicating shoppers plan to make their holiday purchases earlier than ever -- a factor that has yet to reveal itself in November.
The International Council of Shopping Centers on Tuesday, in fact, cut its November sales forecast to 4% to 6% growth from a previous sales-growth projection of as much as 8%, according to the council's chief economist, Michael Niemira.
So far, while retailers face hospitable year-over-year comparisons against their worst holiday season on record, the season's ultimate results remain an open question. Forecasters are not even agreed on the direction of change from last year.
Entering the fray
All the focus on Black Friday appears to have lessened the importance of so-called Cyber Monday, the Monday after Thanksgiving that's viewed as marking the start of the online holiday shopping season. E-tail giant Amazon.com Inc. (AMZN 132.94, -0.06, -0.05%) , for instance, launched a "Black Friday Deals Week," indicating how much time is left before a sale is closed and the percentage of inventory sold, seeking to give shoppers a sense of urgency. Retailers have increasingly put stock in the notion of private sales, sneak previews, and limited-time and limited-quantity sales to connect with shoppers and loosen their purse strings.
"Retailers have started to use the term Black Friday not just as one day on the calendar, but as an adjective," said Fiona Dias, executive vice president of strategy and marketing for GSI Commerce, which helps run Web sites and manage other Internet functions for about 200 retailers from Toys "R" Us Inc. to Polo Ralph Lauren Corp. (RL 77.62, -1.29, -1.63%) .
"Web [retailers] have woken up," she said. "What Amazon.com has realized is that if they wait till Monday, consumers will be broke. ... For online retailers to wait until Cyber Monday, they are going to be out of the game."
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