Thanksgiving is here, which for some people means the start of a month of overeating. For others, of course, it marks the start of a month of overspending, kicked off by Black Friday.
This year, the competition is particularly fierce, and all eyes will be on the results. For many retailers, Black Friday marks the point where the year's ledger moves from red to black; hence (some stories have it) the name. Last year, of course, that didn't happen for a lot of retailers, as panicked consumers hunkered down. Even at places where spending was up, profits were often down, because they had to discount so deeply in order to get customers through the door.
With consumer economic indicators improving slightly, this year is expected to be a little better. But for retailers, the price environment remains ferocious. Competitors are frantically trying to counter Wal-Mart's deep discounts to lure the elusive consumer into their doors: Target is giving away $10 gift cards to those who spend more than $100, while JC Penney is offering recorded wake-up calls from celebrities to help you get out of bed for their 4 am open.
One of the most noticeable effects of this competition is that Black Friday seems to be creeping back towards Thanksgiving itself. Amazon started its Black Friday deals on Monday, staggering them so that there's something new to shop for every few hours. And Wal-Mart is staying open on Thanksgiving, ostensibly in order to prevent the traditional crushing deaths that regularly occur when they open their doors. There's a good chance that I will take a nap and then head out to our nearest Wal-Mart to blog it for you, and also (she mumbled) to maybe buy a Cricut Expression for all the wedding stuff we have to make over the next six months.
The real test, though, will not be when the Black Friday numbers come out in a few days. Rather, it will be whether retailers can sustain a decent sales level without phenomenal discounts (that Cricut Expression is more than $100, or 30%, off). We won't know that for several weeks, at least, and probably not until after the New Year.
Copyright © 2010 by The Atlantic Monthly Group. All rights reserved.
Yes I'm sure there will be crowds though 10.2% of people having thanksgiving dinner tomorrow are out of work and part of what I think is going to happen is some 'rule' setting on holiday spending at alot of these tables. Of my 3 brothers one is unemployed and still looking...now he has a lead and his severance doesn't run out until February. But he is being very careful. We are going to talk tomorrow about the 'rules' for Christmas which essentially will be a no-gift-to-adults and $15-20 cap per niece/nephew. We spent last year about $200 on, frankly, junk at Target on Black Friday and this year we've already donated that $200 to our local foodbank.
While we could spend at the mall, spending the day with my unemployed brother reminds me that there but for the grace of God go I and that hardly makes me enthusiastic to whip out the plastic on Black Friday. I suspect I'm not the only one that feels that way.
Some of the commenters on my company's new site are talking about shorting certain retailers. I guess they aren't convinced that black Friday will be black enough this year.
Alot of the valuations in retail today are insane. JCPenney and Macy's are trading not only maybe 10% off where they were before Lehman filed, is the world for mall based department stores really only 10% than summer 2008, I think not. Mostly retailers have beat expectations coming in 2009 so far and I think a beat in Q4 is baked into the stock prices, that the season gets more promotional and gross margins squeezed isn't really priced in to the stocks.
Not only that, but the Altman Z"-scores for some of the retailers predict bankruptcy. In the current liquidity-fueled rally, a lot of deadwood has risen with the tide.
I'll second that, not from some score. Some of our customers are very long and tenuous on their payables. Have been all year. I expect some of them to fail soon.
To risk being off topic, there seems to be two management strategies at play.
One is to use technology to centralize control and decision making, and cutting pay and skill levels at the edge.
The other is to empower the edge with technology, ie. allow good staff to do more.
From what I've seen so far, the first are on the edge of disaster, where the second group seem to be doing fine and picking up market share.
Derek
Derek,
Your observation is an interesting one. Would you mind elaborating on it a little here? I think it's on topic, since it deals with retailers.
Sure. I'll try really hard to avoid mentioning names :)
Two grocery retailers I deal with directly, and a third that I have dealt with from time to time.
In one retailer, the local staff have little or no decision making power as to where things go, what is presented, what is stocked. Decisions are made elsewhere, to match other stores, or whatever. Some locations the doors are opened by an automated system, and locked the same way, with no possible input even by the manager. Sales in that store locally and anecdotally in another larger market are bad. Staff is alienated, hate their jobs. The needs of the market in this community are ignored, ie. we have a large retiree community, well monied. Lighting is a big issue for older people. Lighting sucks in the store. Again, a decision made far away. Any locally produced food products or produce aren't available. Working there is a pain, last time I had 3 people within two hours complain about how expensive it was going to be since I was there sooo long. You know, I can leave if you want.
A second store, the local manager has far more control. Computerized and automated as the other, but the data is used to train the staff, adjust stocking or whatever to fill needs. Department managers have a stake in sales, they purchase local produce and products, even promote them. Store is full, busy, staff happy and fun to be around.
Both have probably very similar ordering and warehousing mechanisms, but the local either drives or is driven, depending on the management style.
I understand branding and the like, and centralized control is fine in a market that is growing. If someone can't make money in a 3-5% growth economy, it would be obvious. But with the tough conditions in the marketplace now, getting a few extra pennies from customers through good salesmanship can make a big difference.
It really really doesn't help to have local contractors or staff telling everyone they know in a small town that so and so isn't paying their bills. That is what happened to the third retailer. When they opened the store, they did as customary, hired a bunch of people to stock shelves and get things in place for opening. They hired the good ones. The others they told to go home and forgot to pay them for the couple of weeks. That was just plain stupid, and seemingly in character with how the organization is run.
Oddly enough, Walmart seems to delegate an amazing amount of control to the staff. Not what one would imagine, but maybe has something to do with the results. One of Russ Robert's podcasts talks about this.
http://www.econtalk.org/archives/2009/06/platt_on_workin.html
My observations are from my point of view, working as a contractor for these firms.
Derek
Bought my wife a Cricut last year for Christmas. She loves it. Makes some pretty cool things. Good choice.
Quick.. Your favorite contraption - the Quesadilla Maker will be on sale in amazon 1 hour from now.
Incidentally, they will make you a quesadilla at Chipotle if you ask them to, even though it's not on the menu.
I am loving that $78 1T external drive. But I'm not sure they'll be any left by the time I get out on Friday.
Don't worry. By friday you'll need a 1.5T.
Derek
I'm skeptical consumers will be doing much for christmas.
However, it is very possible that many people will decide to go all out instead making their mortgage payments.
Just like the Democratic approach to health care. We're going broke anyway, let's go out and pass a $1 trillion bill.
I'm concerned that any criminal types who read the Atlantic will stake out DC-area Wal-Marts on Thursday evening looking for approximately-seven-foot-tall women carrying at least $300 in cash in envelopes.
Here's what I'm in the market for: http://www.amazon.com/Mobile-Office-WM-01-Laptop-Steering/dp/B000IZGIA8/ref=cm_cmu_pg_t
I object to folks opening up stores on Thanksgiving. Can't we give people a day off, sometime?
(Yes, yes, they probably volunteer, etc., etc.)
I object to Klug's objection. As someone who doesn't celebrate Thanksgiving, I hate that all the good restaurants are closed.
I don't favor forcing stores to stay open either. I just can't see a place for society or Klug having a say in that decision. Let the store owners decide. (If stores are violating the Thirteenth Amendment, I favor Congress using its powers to stop that. Otherwise, butt out.)
Not to mention many people probably want to work and make extra cash. Why should Klug prevent them from doing so?
Thanksgiving is here, which for some people means the start of a month of overeating...
Well, if you are poor and waiting for a meal in a mission food line in NYC, at least you won't be served trans fats -- even if it means you won't be eating at all.
~~~~
Hungry, sure, but food is healthier
When a small church comes to the Bowery Mission bearing fried chicken with trans fat, unwittingly breaking the law, they’re told "thank you." Then workers quietly chuck the food, mission director Tom Bastile said.
"It’s always hard for us to do," Basile said. "We know we have to do it."...
~~~
God bless you, Mayor Bloomberg. (He's also proposing calorie labelling requirments on mission food line items.)
It may be black in more ways than this. Dubai is expressing doubts on it's ability to pay debts, Greece is iffy.
May we live in interesting times.
Derek
The cricut is $188 online at Walmart.com right now and showing in stock, so you can buy it without having to leave your house and risk being crushed.
link