Black Friday is changing as retailing rapidly evolves
For stores, Black Friday looks like the survival of the fittest this year. On the day after Thanksgiving, customers traditionally rushed in retailers’ doors, but with major merchants going out of business or shuttering mall locations, retailers are rushing out the door to find shoppers.
Those “doorbuster specials” will still be there as megastores like Kohl’s, Target and Walmart attempt to create scarcity and excitement with those “first 100 customers to buy a flat screen” prices. But online shoppers may find those prices aren’t that special. In fact, they may already have purchased some pre-Black Friday deals, which started at the beginning of November.
“The historic Black Friday is ebbing,” said Fitch Ratings retail analyst David Silverman. “It’s not as necessary as it once was.”
America’s post-Thanksgiving Day shopping frenzy used to start off with bang — literally sometimes — as frantic customers celebrated by knocking down security guards and fighting each other to grab toys and electronics. But now the drama (and the media coverage) is likely to be more muted.
“There will still be an uptick in sales that day,” predicted Managing Director Jeff Holzmann of Iintoo, a commercial real estate company. “But you probably won’t see elbows flying.”
Big names disappear or shrink
The brick-and-mortar retail sector has sustained major damage. Stand-alone stores like Toys R Us are gone, and many “anchor stores” at malls, such as Sears, are shutting down. Other retailers like Gap, JCPenney, Lord & Taylor, Macy’s and Michael Kors are cutting back on locations. Even home-improvement chain Lowes is closing many stores in the U.S. and Canada, while offering a 40 percent discount on some appliances.
It’s a scary time for retailers, due in part to a phenomenon known as “cascading,” or unplanned markdowns. “Every company has prepared for promotional markdowns during the Christmas season, and they’ll grow as you get closer to the holiday,” said Fitch’s Silverman. “But unplanned markdowns happen when the merchant at the other end of the mall is going out of business, closing the store or simply has to dump inventory whose shelf life has expired. Then everyone has to cut prices and keep lowering them.”
Shrewd merchants have already done this, which is why the Christmas shopping season has begun earlier. The rush is on to beat “antiquated retailers” that still believe Black Friday is the busiest day of the year for a shopper’s credit card, said Jonathan Cherki, CEO of ContentSquare, a software provider for retailers.
Major chains used to believe that the post-Thanksgiving holiday was special because it was the date when their balance sheets finally turned from red (losses) to black (profits). Now they see it simply as part of a continuum that starts right after Halloween and continues through the actual holiday — as more shoppers click online shopping sites even as the turkey is still on the table.
This trend follows through to New Year’s Day as retailers get returns and, they hope, sell a few more items at the same time. That’s one reason Kohl’s said it will take Amazon’s returns, said Silverman. “Once you get them in the store, there’s a 25 percent chance they’ll buy something else.”
Get in the “Ama-zone” or perish
As America’s largest online retailer, Amazon remains the elephant in the room, and stores in shopping centers have to get in the “Ama-zone” or perish, analysts said. One way is to dispel the traditional Black Friday myth that only a certain amount of inventory is available, and you have to buy it that day to get that price.
The key words are “virtual inventory,” said CEO Frank Poore of Commercehub, which helps online businesses manage their stock. Savvy shoppers can always look online, find the toy or electronics they want and keep clicking until the price drops. Retail stores have to provide the same services as online retailers, such as offering to get items that aren’t in-store from another store and providing immediate home delivery after those “first hundred” are gone. Otherwise, they’ll lose customers to someone else.
When Amazon upped the ante by offering free shipping on holiday orders, other retailers had to follow suit. Chief Technology Officer Alex Shvartz of FundKite, a business funding platform, noted that Black Friday store traffic drops by 5 percent to 10 percent a year, while UPS, which shipped roughly 750 million packages during the 2017 holiday season, expects that number to increase by the same rate. The U.S. Postal Service anticipates even more business — a billion parcels this holiday season.
For stores to survive, they need to be more customer-friendly, while malls have to provide services like easy or valet parking, and amenities such as free coffee and child care, foot massages and immediate product usage, said analysts. They need to do the things an online retailer can’t — and respect the customer.
“Black Friday was never an experience that most people enjoyed,” said Iintoo’s Holzmann. Fitch’s Silverman agrees. “Customers want to shop with intelligence, not with fisticuffs.” Millennials in particular have different buying habits. “They’d rather have something personal and handmade than a mass-produced item from overseas,” said FundKite’s Shvartz.
Retailers that have survived the wars with Amazon — and each other — have hope. As their numbers dwindle, they’ll see fewer of those “cascading markdowns” because most of the losers will already be out of business.
And the rest will pick up inventory and brand names from the ones that failed. Kroger is already offering 600 Toys R Us “pop-up shops” with Toys’ mascot Geoffrey the Giraffe, and Walmart is enlarging its already huge toy department.
Many retailers may actually end up “in the black” on that Friday after all.
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