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Black-Friday-Weekend Woes End “Trump Effect”

by Wolf Richter, Wolf Street:

Back to the Retail Quagmire.

Since Trump’s victory, stocks have soared in magic anticipation that the economy would somehow suddenly rise from its languid state and reach escape velocity. Consumer confidence has jumped, even according to Gallup’s Economic Confidence Index whose defining aspect over the years has been its daunting negativity [The Trump Effect on Americans’ Perception of the Economy].

And the National Retail Federation had gushed recently that spending would rise 3.6% this holiday selling season, compared to last year. And we may still get that, but miracles have become scarce and hard to come by these days.

Instead, what we got this weekend, the all-important Black-Friday Weekend, is more of a reflection of the economy than the hype surrounding it. And it’s not good.

So the National Retail Federation said today that on Black Friday and Saturday 2% more consumers shopped than last year – 154 million out of a total population of 324 million! This includes online and brick-and-mortar stores.

For brick-and-mortar stores, it looks dreary: the number of consumers who went to the mall dropped 3.7%, according to the NRF. According to retail analytics firm RetailNext, cited by Reuters, net sales at brick-and-mortar stores dropped 5% over Thursday and Friday, while the number of transactions plunged nearly 8%. Hence the anecdotally reported gloomy traffic at brick-and-mortar stores.

However, the number of those who did their shopping online rose by 4.2%. Online sales are booming: Adobe Digital Insights reported that Thanksgiving and Black Friday, online sales had soared 18% to $5.27 billion.

This includes the online operations of brick-and-mortar retailers. According to the NRF, eight of the top 10 ecommerce sites in terms of traffic over the weekend belonged to brick-and-mortar stores.

But it wasn’t enough. Rather than spending more on average, as was expected and hoped for, shoppers spent 3.5% less online and at brick-and-mortar stores, with the average amount spent dropping from 299.60 per shopper last year to $289.19 this year.

So this is a medium-sized scandal.

Retail gurus pointed at the culprit: discounting. Or rather, the consumers’ relentless focus on deals. They were all looking for deals, no matter where they bought, and if it wasn’t discounted, tough! The survey found that:

36.2% of the shoppers said that everything they bought was on sale, and they didn’t buy anything that was not on sale.
12.1% said that at least three-quarters of what they bought was on sale, but they bought some things that were not on sale.
15.5% said that between half and three quarters of what they bought was on sale.
16.2% said that between a quarter and half of what they bought was on sale
20% said that a quarter or less of what they bought was on sale.

In other words, nearly half (48.3%) of the battle-hardened American consumers bought most or all their stuff only when it was on sale. A nightmare for retailers. Their heavily discounted and promoted door-buster loss-leaders are designed to bring consumers into the store, in the hope that once they’re in the store, they’ll actually buy something that the store doesn’t lose money on. But no.

And this focus on discounted items depresses dollar sales.

The NRF, which is still sticking to its forecast of 3.6% spending increase, had an additional explanation for the debacle: the extended shopping season. More retailers started their promotions before Black Friday, and consumers assume that the promotions will last for the rest of the season. NRF CEO Matt Shay noted: “Consumers know they can get good deals throughout the season and these opportunities are not a one-day or one-weekend phenomenon and that has showed up in shopping plans.”

He explained that 23% of the presumptive shoppers haven’t even started their shopping spree for the season. That’s up from 19% last year at this time. So this would indicate that these sales would still happen, but they’d happen later in the season. Those are the hopes.

That’s a new twist, however. Just days ago, this Black-Friday Weekend was still going to be sizzling hot, and no one blamed the extended season, delayed spending, or discounting.

The problem is: They no longer shop till they drop. Read… Black-Friday Woes: The Death of the Department Store

Read More @ WolfStreet.com

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