The shaky condition of U.S. retail will be put to the test this weekend, when Wal-Mart Stores Inc., Macy’s Inc. and other chains roll out their Black Friday specials.
About 135.8 million Americans are expected to shop in stores or online over the four-day weekend, according to the National Retail Federation, the largest U.S. retail trade organization. The amount they’ve spent has declined over the past two years, dropping 11 percent to $50.9 billion in 2014.
Though consumers are benefiting from lower fuel prices and unemployment rates, retailers have their challenges. Mall traffic is in the midst of a long-term slowdown, and shoppers are spending more on experiences and less on stuff. More recently, a warm autumn has curtailed sales of seasonal merchandise, leaving stores with excess inventory. All those factors point to a need for heavy discounting -- good for consumers, but not so great for retailers’ profits.
“From the perspective of the amount of discounting that’s going on, the over-inventory situation, it seems like there are going to be a lot of great deals in the next 45 days,” said Bob Drbul, a retail analyst at Nomura Securities International.
Consumer Spending
The idea that consumers won’t spend without some serious enticement got a boost on Wednesday, when Commerce Department figures showed household spending rose less than forecast in October. Purchases increased 0.1 percent for a second month, while the median forecast of 74 economists in a Bloomberg survey called for a 0.3 percent advance.
And while the NRF’s traffic forecast represents a 1.6 percent increase from last year, there’s a risk that fewer shoppers than expected may show up. Last year, the NRF had forecast 140.1 million consumers would hit stores and e-commerce sites, 4.8 percent more than actually turned out, according to its post-weekend shopping survey.
Some stores are pulling back on their Thanksgiving weekend hours this year and electing to spread more of their specials throughout the month. But the weekend after Thanksgiving is still one of the busiest for U.S. retailers, who use the period to highlight their offerings. Wal-Mart said it expects record crowds on Friday, even though it’s putting most of its discounts online first.
Amazon Effect
Also hurting retailers is Amazon.com Inc. The e-commerce behemoth has been luring shoppers with its free, two-day shipping membership program and an increased focus on fashion that’s challenging even industry stalwarts like Macy’s, Drbul said.
Target Corp. has countered by providing free shipping and returns on its holiday orders, while Wal-Mart plans to offer more than four times as many discounts as last year on the Monday following the Thanksgiving weekend.
Once considered the official start to the holiday shopping season, Black Friday bargains have been increasingly overshadowed by retailers rolling out specials earlier in November. Still, the NRF estimates that the weekend accounts for about 10 percent to 15 percent of total holiday sales.
“We expect a robust four days,” said Sarah Quinlan, head of market insights at MasterCard Advisors. “It still is a major kickoff period.”
News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here
