Retailers Shot Themselves in the Foot on Black Friday

Early reports by the National Retail Federation show a Black Friday weekend sale drop of 11% – from $57.9 billion in 2013 to a projected $50.9 billion this year.  Precipitating this overall drop, the total number of Black Friday weekend shoppers decreased by 5.2% and per person spending dropped 6.4% from $407.02 per person last year to $380.95 in 2014.  The drop comes as a surprise.  Predictions for this season, based on low gas prices, low unemployment, and higher consumer confidence, – were rosy.  Analysts expected year-over-year increases.  It begs the question, if consumers are in a better shape to spend money in 2014 than in 2013, what changed between 2013 and 2014 to cause such a large consumer drop off?

Retailers have been opening their stores at progressively earlier on Black Friday.  A few years ago, they started opening their doors at midnight on Black Friday and have now moved their opening hours into the 5-8pm range – right in the middle of Thanksgiving dinner.  The logic behind this transition is easy to understand.  Retailers are in a cold war with one another for consumer market share.  This war goes nuclear during the holiday season.  Retailers historically offer a limited quantity of heavily discounted merchandise on Black Friday.  This merchandise draws in customers who purchase the heavily discounted items and who then go on to buy additional profit margin friendly products while they are in the store.  Since all the big retailers follow this same discount/lure formula on Black Friday, many with a roughly similar set of discounted merchandise, the big retailers found success in shifting market share by opening their doors earlier than competitors.  Since costumers know that the best deals to be found on Black Friday can sell out fast, customers are drawn to the earliest store opening, as this maximizes the time they have to locate a valuable limited time offer.  While we still need more data to give this Black Friday a true postmortem, I believe that changing the Black Friday start time to Thanksgiving dinner had unanticipated consequences on consumer behavior.  Some possibilities to consider:

• Some perennial Black Friday shoppers are not going to forgo their Thanksgiving dinner for Black Friday, no matter how good of a deal they are getting.  The fact that these perennial shoppers miss their Black Friday opening bell is a turn off to the whole Black Friday shopping experience for them, as they expect the best Black Friday deals to be gone by the time they make it out to the stores.
• For some families, Black Friday is a family tradition.  Moving the Black Friday start time away from Friday morning makes these people re-evaluate their traditions.
• Retailers are facing a backlash against a move that is seen as a threat to Thanksgiving and an abuse of their workers by the general public.  I have seen social media posts from both ends of the political spectrum calling for a boycott of stores that opened during Thanksgiving dinner.  It’s always a bad sign for a business when both political liberals and political conservatives agree that a business is engaging in unethical practices.
• For consumers that came out and shopped on Thursday may be spending less overall time at stores and may be less inclined to hit up multiple stores due to being tired.
• Consumers no longer have a defined day and start time to the Black Friday holiday.  This diminishes the power of the Black Friday shopping day brand.  A large majority of Black Friday shoppers aren’t actually doing a high level of research to determine the best price on products – they are simply showing up at stores and browsing under the general belief that there are diamonds in the rough to be found on every aisle.  By diminishing the Black Friday brand, consumers begin to question these loosely held beliefs reducing the chances of a conversion.

The last point, consumers not impulse buying based on the belief of good deal, may be supported in the early data by the average per person spending drop 6.4%.  A lower per person spend may reflect consumers abandoning in store impulse purposes in favor of targeted, online purchases where competition for the lowest priced product is only a search away.  The coupon strategy is more of a benefit for retailers when there is an element of uncertainty in the mix – when impulse becomes a possibility.  In the near term, retailers may have shot themselves in the proverbial foot by trying to hard to stretch out the fun and ambiguity of Black Friday.  Like Icarus, they may have over reached when chasing for success.