Tuesday, October 21, 2014




Advertise with us

The Economist: Black Friday Fading?

By By Ray Perryman
Nov. 24, 2012 at 5:24 a.m.


Black Friday has long been associated with the beginning of the most intense period of holiday shopping of the year, with millions of Americans hitting the stores the Friday after Thanksgiving to take advantage of sales and special deals offered by retailers. Because, during normal economic times about 70 percent of U.S. business activity is driven by consumer spending, the volume of sales is a closely monitored statistic for overall business activity.

The phrase "Black Friday" originally referred to a horrific day for the stock market in the 1860s, but has been describing the day after Thanksgiving since the late 1960s. It is often asserted that Black Friday is the time when many retailers begin to show a profit or "go into the black" for the year.

In 2011, sales were nicely positive, a welcome relief after several years of bad news. This holiday season is projected to be even better, with the National Retail Federation expecting sales to grow by 4.1 percent to more than $586 billion. ShopperTrak (which is a retail technology company that anonymously counts people and analyzes purchasing data) is projecting growth of 3.3 percent for the holiday period. Even with sluggish job and income expansion, shoppers are feeling more confident, and purchasing is expected to reflect that optimism. I think the growth rate will be somewhat higher.

There are as many days between Thanksgiving and Christmas as there could possibly be - 32 - with the added bonus for retailers of an extra weekend (as well as one between Christmas and New Year's). ShopperTrak has been studying the specifics of holiday purchasing for years and indicates that last year's 10 busiest days of the season accounted for almost 37 percent of total sales for November and December. Black Friday is expected to be the busiest day, followed by Saturday, Dec. 22 and then Dec. 15. (For those among us who would prefer to avoid the crowds, ShopperTrak suggests the Monday through Thursday of the week following Thanksgiving.)

While Black Friday remains a major shopping day, there are some signs that its dominance of the seasonal retail rush may be fading. Special deals are being offered earlier every year, and some customers are taking advantage well before Friday. Another major reason is the growth in online shopping. Shop.org estimates that online sales will expand by 12 percent over the 2011 holiday season, pushing the total to $96 billion. Over time, online shopping will likely continue to replace some component of sales from actual foot traffic to brick-and-mortar stores.

The latest area of cybersales growth is based on social media and phone shopping apps. Retailers have invested big resources in building sites that make shopping as easy and user-friendly as possible, and (if done well) these overtures stand to pay off in a big way. Even with the growth in online purchases, however, foot traffic is expected to increase over last year.

It remains to be seen how the shopping season will actually develop, and extremely bad news on several fronts has the potential to halt consumers in their tracks (though I don't think this will be the case). If the situation worsens dramatically in the Middle East or if Fiscal Cliff negotiations break down, for example, Americans are likely to pull back from planned outlays.

Naysayers point out that retail sales are no magic answer for lasting prosperity and that we can't spend our way to a healthy economy. There is some truth to that argument. Over the long term, economic expansion will depend on dealing with fiscal problems and encouraging business investment and hiring. Another critical argument points out that entry-level retail jobs tend to involve low pay and are, thus, not doing much to help the economy. While it is true that the industry tends to pay low wages, part of the reason is that many positions are part time.

Higher retail sales volume is good economic news. Purchases encourage and support a variety of industries ranging from wholesale distributors to advertising agencies to manufacturing firms. Although there are other shopping options that are diluting Black Friday's dominance to some extent, it remains the cornerstone purchasing day and will for years to come.

Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.

SHARE

Comments


THE LATEST

Powered By AdvocateDigitalMedia