November 29, 2013

Black Friday blues: Retailers ramp up the competition

With a narrower-than-usual holiday shopping window, several major chains have lowered expectations on profits.

From staff and news services

Although shoppers may look forward to Black Friday each year for the deep discounts and extended store hours, retailers pin their hopes on more than just one day’s worth of sales. It’s the entire season overall that they’re paying attention to, according to Curtis Picard, executive director of the Retail Association of Maine.

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Shoppers wait outside Target in South Portland before the store opened early on Black Friday in 2010. Target, Walmart and Kohl’s are among more than two dozen major chains that have lowered their profit outlooks.

2010 Press Herald file photo/Derek Davis

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In fact, the busiest shopping day of the year is often not Black Friday at all, but the Saturday just before Christmas, Picard said. This year, that falls on Dec. 21.

“Honestly, it’s the whole season that retailers look at. They have tried to expand that window as much as they can by offering promotions before Thanksgiving and even as early as Halloween,” Picard said. “The advent of gift cards further extends the shopping season into January as people use their cards.”

Maine stores may have a disadvantage this year. The period between Thanksgiving and Christmas is the shortest possible – just 26 days – because Thanksgiving fell late this year, so retailers have a tighter time frame in which to make money. Tepid sales during this year’s back-to-school shopping period in August – the second-biggest retail season of the year – are also driving stores’ push to maximize holiday profits.

EATING INTO PROFITS

The holiday shopping season is crucial for retailers, which get between 20 percent and 40 percent of their annual business during that time, according to the National Retail Federation.

Retailers are counting on the holiday shopping season to boost end-of-year revenues, and are offering up more sales to draw consumers in.

Since the recession began in late 2007, stores have had to offer financially strapped Americans ever-bigger price cuts just to get them into stores. But those discounts eat away at profits.

So far, Walmart, Target and Kohl’s are among more than two dozen major chains that lowered their profit outlooks for either the quarter or the year. A big reason is the expectation that they’ll have to offer huge discounts in order to get shoppers to spend.

There are already signs that retailers are aggressively discounting. Walmart has started matching or beating the prices that certain competitors such as Best Buy are advertising for some toys and electronics for the day after Thanksgiving – popularly referred to as Black Friday. Best Buy also plans to match rivals’ prices, even after customers have purchased items. And Target, better known for its whimsical advertising, is touting its prices in holiday TV ads for the first time in at least a decade.

Those moves come even in the midst of signs that the national economy is recovering. The job market is making strides, the housing market is rebounding and the stock market has hit new highs.

Overall, the National Retail Federation expects retail sales to be up 3.9 percent to $602.1 billion during the last two months of the year. That’s higher than last year’s 3.5 percent growth, but below the 6 percent pace seen before the recession.

THE X-FACTOR: BAD WEATHER

Retailers in Maine said that even though Maine stores were closed on Thanksgiving, there are still ways to shop and take advantage of special promotions online. The holiday-shopping cycle has become a 24-hour event.

“We are grateful to have the day off, but our computers are going to have to work,” said Chris Brown, founder of Bull Moose, the Maine-based music, book and video game store. “Most of our Black Friday deals start on bullmoose.com on Thanksgiving with free economy shipping on $20 orders.”

Picard said that “the challenge this year is the shorter time between Thanksgiving and Christmas because of the way the calendar falls. For many people, they mentally can’t start the holiday season until Thanksgiving hits, so that means fewer shopping days. What really matters here is the weather. In 2008, an ice storm hit on the weekend before Christmas and retailers weren’t able to open. Those were lost sales you don’t get back – you can’t make up those sales.”

(Continued on page 2)

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