Black Friday Was a Bust
The National Retail Federation has admitted defeat. Sales over the past holiday weekend dropped 11% over Thanksgiving weekend in 2013 according to the organization in a press release yesterday. The organization reversed course after being highly positive about the prospects for shopping leading up to the announcement of the estimated figures.
Shopping traffic for the weekend dropped 5% or 6%, depending on how you want to calculate it, compared to last year. The Federation tried to put a positive spin on the news.
I avoided shopping this weekend, from Thanksgiving day through today, the so-called Cyber Monday. Don’t get me wrong — there is much shopping I want to do before the holidays in December, but the excessive deal-wrangling this weekend just drives me away from wanting to pursue any shopping.
I’m not so much of a bargain hunter. I am interested in good deals, but most of the supposed bargains you see around Thanksgiving look good and sound good, but just aren’t all that good. And the details that are truly good, whatever that means, are almost always for items I wouldn’t want or don’t need.
For deal shoppers, the best time to buy is generally after Christmas, but there are a few obvious problems with that. First, it’s difficult to generalize. Overall, this might be true, but for any particular item, there’s no way to know. That’s why shoppers rely on Black Friday deal ads. They give shoppers some confidence, even if the resulting deal is not the most ideal price for any particular item. If you buy a gift using a Black Friday ad or Cyber Monday deal, you feel good about saving money, and for the human brain (but not your future self), that’s better than actually saving money.
The best method I’ve found for spotting good deals is CamelCamelCamel. This only applies if you have a specific item in mind, if that product is sold on Amazon.com, if Amazon.com generally offers the best price for that item among retailers, if you’re not on a tight time frame for making the purchase, and if you are willing to be a customer of Amazon.com. CamelCamelCamel is a website that tracks Amazon.com’s prices and can alert you whenever the price reaches a certain point. That price point could be one that you specify as your trigger, or it could be a price suggested by the CamelCamelCamel service using an algorithm that takes into the previous lowest price for the item.
The best thing about CamelCamelCamel is that it makes me wait. I’ve had items registered — it can work directly with your Amazon.com wish list if you want — for over a year, and suddenly, I’m alerted that an item, say a movie Blu Ray set, has reached my price point. The delay ensures I’m no longer under the influence of an impulse desire to purchase. Because if there’s something I want and need right away, and the cost is reasonable, I’m going to buy it right away rather than wait for a deal.
But if I know that, for example, the remastered Star Trek: The Next Generation season Blu Rays are eventually sold for more than a 60% discount off their initial sales price, usually within a year, I just set my price point trigger and wait.
And maybe more and more consumers are like me, bypassing the heavily advertised deals for more researched best prices. That could be one contributing factor to this year’s sharp decline in consumer activity over the traditionally biggest sales weekend of the year.
What role does the larger economy have? If people feel they are worse off financially, they might not plan on shopping as much this year as they did last year. If, however, people feel they are in a better financial position than they were last year, they could be less likely to pay attention to the holiday sales. In other words, you could use just about any state of the economy to justify both a strong and a weak holiday shopping season.
There might be some legitimacy to the idea that people feel better about the economy, which takes away from the desire to seek bargains at every opportunity. It’s clear that the recession in 2008 had long-lasting effects, not just in terms of employment, but in approach to life and money. Ideas like frugality, extreme saving, and supercharged planning for retirement became much more popular and legitimate than during times of stronger consumer confidence.
Throughout this period following the recession, I considered whether this was a permanent shift in approach along the lines of how the Great Depression affected an entire generation’s approach to money. The question was whether Millennials or Generation Y would be defined by the recession. My thought has always been that this is temporary, and I still think that is the case.
Perhaps this past weekend is the first indication that once Millennials feel more confident about their financial situation — and the lower gas prices may go a long way to reinforce that feeling today. Holiday sales are still driven by shoppers aged 18 to 34, so if this group is feeling better about the economy, this could be start of the generation’s shift away from conscious spending. It was fun (and successful) while it lasted.
The increase in confidence, whether it’s starting now or not, is going to have some profound effects. The value of assets — the stock market, real estate, etc. — will increase. Even if retailers continue to see problems throughout this year’s holiday season, the long-term prospect for sales are good. Confidence overflows into all areas of commerce, at least for some time. And during that time, shareholders benefit.
Workers feel confident about their employment prospects, so executives work harder to retain the best talent. Salaries increase. Disposable income increases. Prices also increase, but consumers handle it.
Another potential drawback that resulted in this year’s decrease in spending is the backlash surrounding the idea that retailers want to remain open on Thanksgiving Day. Retailers claim they are responding to customers’ demand to allow in-store shopping during the holiday, and there’s no doubt there are more than enough shoppers lined up during the holiday to give stores a reason to open. But employees are generally not happy. No one wants to be forced to work when the rest of the country is celebrating a holiday that supposedly focuses on time with family and friends.
And there are movements that encourage people to change their shopping behaviors during the holidays, whether’s it refusing to patronize stores that remain open on Thanksgiving, refusing to buy anything on Black Friday (also known as “Buy Nothing Day”), or encouraging shopping at family-owned local stores rather than large national and online retailers. These trends permeate Generation Y as much as or more than the desire to spend frugally. There’s no question that this disdain for large corporations, consumerist culture, and mass materialism has an effect on shopping attitudes for a good proportion of Millennial shoppers.
Did do any holiday shopping between Thursday and today? Was your approach different than last year’s? Are you spending more money for the holidays this year?
In addition to CamelCamelCamel (or it’s many similar sites – i use the Traktor) i also use InvisibleHand. It shows the cost of the item elsewhere so you can see if Amazon has the lowest price. I will compare the current lowest price to the price history.
Anything sold by Amazon (not just by third party sellers) has a link at the bottom of the page to tell Amazon of a lower price. I have used the feature and had the Amazon price drop to that lower price within a day (i have also had the Amazon price never change).
Maybe it was just me but the deals this year weren’t anything special so this news isn’t a shocker. People are getting better and better at finding deals so an over-hyped day of mostly mediocre deals is not going to move the needle anymore.
Makes sense to me.
Virtually all of my shopping was done before Black Friday, in part because I keep an eye out during the year for sales/clearances/yard sales/whatever, and in part because most of my holiday is being paid for by rewards programs.
The only things left to do were to write a check to the church in which I grew up (my dad said he didn’t want any gifts, just contributions in his name) and to pick two more items for my daughter and son-in-law from their Amazon wish lists (which are being paid for with gift cards I earned from the Swagbucks rewards program).
Just did those, and I’m done.
Have done Black Friday in the past, but I’m just not feeling the need to do so these days. As you note, the “deals” aren’t generally great (NerdWallet did a study on this recently, comparing last years ads with this year’s) and I don’t like crowds. Online vendors don’t often offer free shipping to Alaska, so that’s generally out as well.
It seems to me that people are holding back a bit, and more being frugal in their spending. We are cautiously optimistic.
Maybe they haven’t considered that people are just generally sick of their madness? Sick of the annual news reports, hype, loud TV commercials, flyer piles the size of phonebooks? It actually feels to many people like they’re a dog getting repeatedly kicked for money. …Or that you’re strapped to a chair and all these stores are cramming vanilla cake down your throat over and over. At a certain point, non-stop repetition (with increase in volume in time) gets tedious. Isn’t that how they torture war prisoners sometimes? It can’t go on getting exponentially bigger each year without something breaking in the formula. Even a dump truck can only take so much weight before its axle shatters.
Absolutely none for me – very much a buy nothing day (long-weekend) in the moneystepper household!!
Let me get this straight… the National Retail Federation, which has no governing body, nor anyone fact checking their numbers, releases Sales information just 2 days after Black Friday? There is absolutely no way they can gather that data in that short of time. This “report” is BS at best.
The NRF gathers their data by surveying shoppers. How accurate is that?
See here for more info…http://www.bloombergview.com/articles/2014-12-01/black-fridays-guesswork-gloom
Let’s not perpetuate this myth.
Well, the NRF’s numbers in the past have generally erred on the positive side for the retailers; after all, their job is to advocate for the well-being of their members through the media. So if that’s the case as usual, and NRF’s numbers are too conservative, the weekend’s results will be shown to be even bleaker than reported. The idea that the NRF is reporting a harsh decline when they’re usually very confident about retailers’ success is telling in itself.
But, as the WSJ points out, the Thanksgiving weekend numbers don’t correlate to entire season numbers. So if history is a guide again, the rest of the holiday season might not be as bad as the 11% drop.
The numbers are based on a shopper survey, not the more accurate retailers’ reports, but that’s no different than the methodology for the same report’s Thanksgiving weekend numbers in previous years, so year-to-year comparisons (same methodology) are still somewhat legitimate (less BS, anyway). Maybe shoppers are less comfortable this year responding to survey-takers accurately, maybe (but not likely) the survey had different questions or wording, but I doubt that accounts for a good portion of the year over year variation in survey results.
I was looking for the data to counter your points and in doing so found that apparently the NRF was very unhappy with Rithotz’s piece and they voiced that opinion to the Huffington Post, to which Barry replied with the exact data I was looking for:
These guys consistently get it wrong. Not just a little wrong, wildly wrong. You can’t predict sales by polling a bunch of people. That methodology is terrible. As for them being conservative, it doesn’t appear that way.
Ritholtz is posting out the NRF’s forecast numbers aren’t tied to reality. True. But the “NRF Forecast” he’s talking about in the chart is not the post-Thanksgiving survey number. The NRF announces an overall holiday sales forecast in early October. The -11% in the current NRF report reflects survey results from a year-over-year change for Thanksgiving weekend only, not the October forecast, which was an increase of 4.1% for overall holiday sales (year-over-year, compared to 2013) and is not based on consumer surveys. There’s no doubt forecasters get it wildly wrong, just like stock market analysts and TV stars like Jim Cramer. It’s also likely the -11% for Thanksgiving weekend year-over-year is both wrong and not correlated to year-over-year change for the entire holiday season.
There are also many different ways of calculating year-over-year change. Total dollars spent? Total number of shoppers? Average spent per household? Counting just Thanksgiving weekend? Counting just Black Friday? Counting all shopping between late November and December? Identifying just “holiday” shopping between late November and December? I don’t know. You can use numbers to say or prove whatever you want.
There’s no doubt the NRF exists for the benefit and advocacy of the retail industry. They stand to benefit by cherry-picking the best statistics and using flawed methodology like self-reported survey results to make the case that the retail industry is strong and well prepared for a fruitful holiday season. But the fact that they didn’t, and are showing a 11% drop in year-over-year Thanksgiving weekend consumer activity, is enough to think that consumers are approaching the holidays significantly different this year than last year.
I’m not defending the NRF. Everyone’s free to come up with their own methodology, and if the NRF has the worst of the bunch, it’s still internally consistent. When the Commerce Department announces retail sales figures, using its own methodology, the numbers are “seasonally adjusted.” Furthermore, there’s no shortage of consulting firms coming up with their own methodologies for calculating performance, and they also come up with results that differ. (If they came up with the same numbers, they’d have a hard time convincing clients of their value as a consulting organization.)
But maybe it’s worthwhile forgetting about the NRF and turning instead to a group like AlixPartners, a firm that reports on shopping on a monthly basis, and offers their own holiday shopping forecast. They are forecasting an increase in holiday sales between 3.2% and 3.8%, somewhat shy of NRF’s 4.1%. But they don’t have a report on November’s results yet.
From AlixPartners, about their 3.2% to 3.8% overall holiday forecast:
As we’ve discussed each of the last two years, our methodology for predicting holiday sales differs somewhat from the “survey-methods” used by most others. Our view, based on a review of decades of sales data, is that by this point in the year one can already have a reasonable view into holiday performance based on cumulative year-to-date performance alone. This has been remarkably consistent over the last two decades. In fact, excluding 2008, retail sales since 1993 through August have consistently accounted for between 65.6% and 66.6% of annual sales—resulting in a miniscule standard deviation of only 0.00263. When we look at the last seven years, excluding 2008, (the years leveraged in our 2014 analysis) the standard deviation falls to an even more miniscule 0.00196.
It was be interesting to see what AlixPartners has to say about Thanksgiving weekend when they release their next report.