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November 28, 2008 – Comments (3)

Poll 61% of people say they will Spend $0 on Black Friday
http://money.cnn.com/POLLSERVER/results/43610.html

Black Friday: It has to be big, and bold
Given the severe slump in spending, discounts will be the deepest they've ever been this holiday season as merchants strive to stay alive in 2009.
    
Last Updated: November 27, 2008: 6:59 AM ET

'Tis the season of slow sales

Merchants know it's all or nothing when the clock strikes 12.01 a.m. Friday.

For many retailers, their survivability depends not only on having the biggest, boldest Black Friday sales they've ever had, but also on making sure that the critical holiday shopping season doesn't begin and end on the day after Thanksgiving.

Industry analysts warn that there's a high risk of that happening, given that many Americans are in a serious spending lockdown that has already pushed several retailers - including electronics merchant Circuit City - into bankruptcy.

"The bad news is that this could be the worst holiday [shopping] season on record," said Marshal Cohen, chief retail analyst with NPD Group.

"People will line up at 5 [a.m.] for the doorbuster deals," he said. "There'll be a little bit of frenzy for the $400 computer. And it will all be over by 10 [a.m]."

Consequently, Cohen predicts that sales for the November-December gift-buying period, which kicks off on Black Friday, could fall 3%.

The day after Thanksgiving is dubbed "Black Friday" because it traditionally marked the day of the year when retailers finally move out of the red, indicating losses, and into the black, representing profits.

Any decline in holiday sales is a dire scenario in an already crippling year for retailers since the two-month period can account for as much as 50% of merchants' annual profits and sales.

Cohen said this is the first time that he's forecasted a decline in holiday sales. And he's not the only one.

Other analysts are even more bearish with their forecasts.

Richard Hastings predicts holiday sales will tumble 6% to 8% this year.

Hastings, a consumer strategist with Global Hunter Securities, cites the "collapse of home equity," "two years of soaring energy prices" and accelerating job losses leading up to the holiday season for his estimates.

Britt Beemer with America's Research Group anticipates holiday sales will slip 1%, his first negative prediction in 23 years.

"This year looks so bad that even normally good signs for retail sales, such as more Americans staying home this Christmas, can't save the season for retailers," Beemer said.

For its part, the National Retail Federation (NRF), the industry's largest trade group, is a bit more hopeful. The NRF expects holiday sales to rise 2.2%, which would still be the weakest gain in 6 years.

Fewer shoppers expected
Not only are consumers expected to retrench on their holiday-related purchases but Black Friday and the Thanksgiving weekend will also likely see fewer Americans hitting stores.

The NRF said its survey indicates that about 128 million people will commence their gift buying this Friday, Saturday or Sunday after Thanksgiving, down from 135 million the previous year.

That said, NPD's Cohen said retailers really have to go all out and make the most of each day.

To his point, department store chain J.C. Penney (JCP, Fortune 500) announced Tuesday that its Black Friday sale will have "the most compelling Black Friday prices ever offered in the Company's history" with more than 400 categories of products featuring deep discounts.

"Given the current economic environment, J.C. Penney understands the issues facing our customers, and we are committed to offering the season's most affordable gifts," said Ken Hicks, president and chief merchandising officer for J.C. Penney.

"[Retailers] have to give people what they want at any price," Cohen said. "Shoppers will see 75% off on Black Friday and all week after that. I've been doing this for 33 years and I've never seen 75% off signs in mid-November."

Some malls are opening for business on Thanksgiving Day this year because their retail tenants don't want to wait until Black Friday to jumpstart sales.

But mall operators, too, are struggling to stay in business after several struggling retail chains shuttered their underperforming mall-based stores.

For the first time in its history, all of the 11 shopping centers owned by Craig Realty will open at 11 p.m. on Thanksgiving Day.

At one of those centers - Los Angeles-based Citadel Outlets - the Old Navy store is opening as early as 9 p.m. Thursday and both the Tommy Hilfiger and Guess stores are opening at 10 p.m., according to spokeswoman Anita Boeker.

"The earliest that we've opened our centers is midnight. But our tenants are much more aggressive this year. They are nervous," she said.

Smart online sellers, who realize that many cost-conscious shoppers will likely shift some of their holiday shopping online this year for better prices and free shipping, are rushing to grab their share of Black Friday dollars.

On Monday, Ebay (EBAY, Fortune 500) introduced "$1 Holiday Doorbusters." The company said 100 gift items, such as digital cameras and GPS devices, and one luxury item, including a brand-new Chevrolet Corvette, will be listed each day until Dec. 8 on eBay.com for a $1 fixed price.

Cohen and Beemer both expect Wal-Mart (WMT, Fortune 500) to pull in big crowds on Black Friday because of its value prices. "But then [shoppers] will go to some specialty stores as well," Cohen said.

"Look, there is pent-up demand among consumers," Cohen said, pointing to the huge demand for the $250 BlackBerry Storm smartphone that launched this week.

"In this environment, it's absolutely necessary for retailers to have compelling merchandise if they want reluctant consumers to spend money," he said. "Otherwise 2009 will be just like this year has been for retailers."

3 Comments – Post Your Own

#1) On November 29, 2008 at 11:18 AM, devoish (95.76) wrote:

According to the link, 61% will not shop on Friday.

9% will spend $500.00 or more. Assuming this poll represents 250mil US shoppers and none spend more than $500. the total this 9% will spend is $12,150,000,000.

14% will spend between $100.00 and $500.00. Assuming 14% of the same 250mil shoppers and the median of $250. each this group will spend $9,450,000,000.

16% say they will spend less than $100. 16% of 250mil spending $75. each comes to $3,240,000,000

Total predicted spending equals $24,840,000,000.

Last year according to Forrester Research, Black Friday spending was over 20billion, up 5% from the $19bil spent on 2006.

Now I don't know that it is fair to assume that a poll of 61,000 people translates to 250mil shoppers. I also don't know how many said they would shop on Sat/Sun or go online on cyber Monday. If I was you, I would also check my math, and decide if you wanrt to agree with my assumptions. You may want to assume the first group will spend more than $500 each.

My spending/population assumptions seem reasonable when the US population is in excess of 300mil, but I have not done the work to know what this poll actually represents.

But I do know it is 30 days from now until New Years, and 3 24 hour television news stations plus all other one hour news shows have to fill well over 48,000, 3 minute news storys every day, and the cheapest thing to do is take an online poll and report the results and it is even cheaper to report on someone elses poll. It is also cheaper not to look up historical data to put it in context for the reader.

I expect this "news" will be repeated in one form or another for the entire weekend, until we get actual data. And Mastercard will have that data first, including which retailer did the best. If I was MA, I would invest before I told. Since I am not, I am going to green thumb MA since their share price has dropped.

I sure hope no-one is trading just on incomplete "news".

For the record, Private Long Island retailer PC Richards sold out of Sony's blu-ray player at $179.each in the store I went to get one from yesterday evening. In the time I walked the 50 yards from the parking space to the front door I saw 4, 45" or better wall mountable TV's leave the building. In the time I walked back to my car, I saw none. It was 9:00pm, and the salesman I spoke to was in a very good mood.

And that anecdotal story does not mean crap either. Especially on Long Island where we have traditionally lagged the Nation going in to recessions, lead coming out, and not felt them as deeply.

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#2) On November 29, 2008 at 9:45 PM, EPS100Momentum (72.67) wrote:

Did you account for people that are not Christian and will not be buying Christmas gifts? As of 2004 census only 76% of Americans were Christian which accounts to only 224M of the the total population.

 http://www.adherents.com/rel_USA.html

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#3) On November 30, 2008 at 9:25 AM, devoish (95.76) wrote:

EPS,

No I did not consider that at all. Thanks. On the other hand there is Hannukah and Kwanzaa to add some non Christians back in.

The real point was that without the historical data, the numbers meaan nothing.

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