Black Friday - Will Retailers Cash Out?
CAVANAUGH: Our top story on KPBS Midday Edition, cash registers are ringing around San Diego County today on this black Friday. But since the economy is still depressed and unemployment is still high, it's anybody's guess how the holiday season will pan out for local retailers. Luckily, we're not talking to just anybody. I'd like to introduce my guest, George Whalin is founder of retail management consultants of San Marcos which provides business building services to retail companies. Welcome, George. WHALIN: Thank you. Nice to be here, Maureen. CAVANAUGH: Now, we're inviting our listeners to join the conversation. Are you out hook looking for sales? What is it like at the mall today? Tell us about it. Give us a call with your questions or comments. 1-888-895-5727. Remind us how much retailers rely on the holidays to make sure that they're in the plaque at the end of the year. WHALIN: Well, it's a very important time for a big segment of retail. Certainly not all retail. Obviously the heme depots and Lows of the world don't depend on it so much. But certainly anybody in the jewelry business, the apparel business, the consumer electronics business depend on it a lot. In fact, the jewelry business, and the toy business without the holiday sales, would not make a profit the whole rest of the year. They really need the last 6 to 8 weeks of the year to make any kind of a profit for the year. CAVANAUGH: What's the overall prediction for this Christmas season? Are people planning to spend more or less? WHALIN: It looks like they'll spend a little more. But it's not going to be a block buster Christmas. They're saying about 2.7% up, which is pretty anemic. It was more than that last year. Almost 4% last year. And certainly nowhere near what we had before the recession. So it's going to be a reasonably anemic holiday season. Part of it is going to be driven by the fact that realties will sell a lot of merchandise, but they're not going to make a lot of profit on what they sell. CAVANAUGH: You always talk about hot ticket items for retail during the holidays. What are the hot tickets this year? WHALIN: Well, it's interesting. We have had 2 or 3 years now, maybe four years of very aggressive and very hot sales for electronics. And whatever the coolest, latest, newest electronics is, that seems to be driving things. Certainly like iPads and smart phones and video games of all sorts. Of those are the drivers. And even with a lot of folks owning flat screen TVs, they remain a pretty important category. CAVANAUGH: What about just regular department store clothing sales? I've read that clothing items are actually getting a little bit more expensive; is that right? WHALIN: Well, yeah, it's driven by a couple of factors. There are two really important factors that drive the price of clothing. One is the cost of the raw materials. And we saw cotton increase in cost over the last two years pretty dramatically. So that reflects some of it. And the other one of course is shipping. You talked with about the price of gasoline. Getting merchandise from the various plants around the world and into retailer stores, it's very costly today. That's where wee seeing some increase in apparel prices. CAVANAUGH: And I know that you and I have talked. We talked last year about this same subject, George, and you were explaining to us about the fact that things are depressed making this strangely enough a buyer's market. Is this still a buyer's market this holiday season? WHALIN: It definitely is. All you have to do is look at some of the deals that are out there. I started out in stores at about 8:30, believe it or not, there were stores opening at 8:30. CAVANAUGH: Yeah. WHALIN: And I started out at the Carlsbad shopping center, and there were stores with 30% off everything in the store, 40% off everything in the store, 50%. Retailers are very aggressive today. They have to be to get the consumers' attention, and second to get people through the door and get them to buy. CAVANAUGH: Will prices be as low this year as last year? WHALIN: I think they will be to some degree. One of the things that's happened since the recession began is that retailers have gotten much, much smarter and better at managing their inventory. For many years, we saw this typical thing. If the holiday season wasn't quite what everybody expected it to be, first thing they bought their merchandise back in the spring. And if it wasn't what they expected it to be, they had to start discounting it at the very latter part of the season. And the weekend before Christmas, and the first week of January. We're seeing less and less of that every year because retailers are using technology to plan their assortments and selections much better. Of. CAVANAUGH: I just wanted to remind our listeners, we are taking your calls especially if you're at or near a mall to tell us what it's like. 1-888-895-5727. You may be too busy to call! But if you'd like to, we'd like to hear from you. As you mentioned, some stores opened yesterday for holiday shoppers. Some stores are staying open 24 hours. How crazy can they get with these store hours? WHALIN: I don't know. It's kind of baffling to me. First thing, I honestly think it's a mistake to be open on Thanksgiving. Seers and K-Mart found out it was last year. They no longer do that. It's very costly. And they just didn't generate the results that they expected it to. And we'll see what happens at the end of this year. Everybody'll look back and see -- but there was a lot of traffic out last night, opening at 9:00 and 10:00 definitely drove through some traffic. And those that opened at mid-night certainly had people in their stores, and people out in front of their stores. So it drives traffic. First thing, you have to offer really, really low prices. Best buy 42-inch flat screen TV for $200 was a very big deal. CAVANAUGH: That was surprising. WHALIN: I was at the best buy last night at about 11:15 in Oceanside, the one along the 78 there, and there were at least a thousand people waiting in line to go into that store. CAVANAUGH: Wow! WHALIN: It was unbelievable. And I wept down across the parking lot from there, the Walmart store there was swamped with people. CAVANAUGH: But the store doesn't make any money selling these TVs at $200, right? WHALIN: Absolutely not. The whole idea behind having a $200 TV, and is to get bodies to the door, and hopefully they'll buy other things. And in my observations, that's the case. People rarely walk in there and buy one thing and walk out. They usually come out with several other items. CAVANAUGH: So that's one tactic that retailers are using during these still economic tight times. But they seem to be brushing off another tactic, and that is the old idea of layaway. I've seen a lot of ads for that. And layroadway for the last decade or so has gone by the boards. But now, apparently, it's revived. WHALIN: Ah, but we've got a new layaway. Layaway is not like it used be to. It used to be you take the item, go to this counter, and somebody would put it in a shelf for you, and put your name on it, and you'd put a little bit of money down on it, and you'd pay it off for over a few weeks. Today, if you do that same thing, you'll pay a service charge, essentially, for them to handle this layaway. So it's a very different situation. They didn't make money on it before. It was not a profitable thing for them. Today, first in the economic environment, and the way they've structured it, they make some money on this. They're not going to do it unless they can find a way to make a profit on it. CAVANAUGH: So people buy layaway because they don't want to put things on their credit cards and pay interest. Do they end up spending more or less through layaway? WHALIN: It's possible to spend more. CAVANAUGH: Wow. Okay. We're taking your calls at 1-888-895-5727. My guest of course, retail expert George Whalin. Jenna is on the line from San Diego. And gen is at a mall. NEW SPEAKER: I was just at UTC in La Jolla, and I found quite a few good deals. At seers, I didn't wait in the line at all. Macy's was crowded but I found plenty good things. CAVANAUGH: How was parking? NEW SPEAKER: Parking was a struggle, but I wore comfortable shoes and parked far away, and there were plenty of stops still available. CAVANAUGH: Do you usually go shopping on the day after Thanksgiving? Is that a sort of ritual for you? NEW SPEAKER: I actually don't. This is the first year that I bought into the hype and went out shopping. And I didn't have my mind set on anything specific. I just kept my eyes open for a few different deal, and I was really happy with the purchases I made. CAVANAUGH: Thank you so much for calling us. NEW SPEAKER: Absolutely. Thank you. CAVANAUGH: I wonder if the promotion, the relentless promotion that we've been seeing for weeks now up to in black Friday is gonna get some more people out who don't normally shop on the Thanksgiving weekend because it's so hectic. WHALIN: I think that's true to a degree. But like gena, I was in Fashion Valley a while ago. It wasn't crazy crowded. Parking definitely was an issue. I had the same issue she had. But the shopping center was not overly crowded. There were some deals to be had, and if you searched your way through the stores and didn't go into every store, some stores did not have much of a deal. Other stores had very good deals. CAVANAUGH: What about online sales? WHALIN: Well, online sales are becoming a more important part of the whole overall scheme of things. Retailers like online sales because it saves them money, it's less costly for them to deliver the goods to a customer. And it's an important part of the business of selling to consumers. The thing we all have to keep in mind is that it's become much more hyped by the media than the reality of how much business is really being done. It still only represents about 7% of all retail sales. Stores are still the favorite choice for most people to go in, touch things, look at it, get a sense of it, try it on. So it's important. It's a very important part of it, and it's going to be a big -- this'll be a big year. Online sales will be a very important part of the year. But I don't think it's going to take the place of stores any time soon. CAVANAUGH: Last year, everybody was offering free shipping. Now with gas prices up and the cost of transportation a little higher, do you think we'll see that again? WHALIN: Oh, yeah. Definitely. I read a number just the last few days that it looks like half of all online sales are now -- come with free shipping. CAVANAUGH: Okay. WHALIN: It's a very important part of it want. CAVANAUGH: Now, tomorrow is something called small business Saturday. And I know stores, and a lot of neighborhoods, like Northpark, neighborhoods around San Diego, are hoping for a big turnout. What is the concept of small business Saturday? WHALIN: This is something that was essentially dreamed up by the folks at American express who have long done a great job of supporting small business. And the response was very good last year. They did a number of things. They signed up retailers to be a part of it. And a lot of retailers did as groups or individuals, and put up signs about it, and promoted it in their ads, and did a lot of promotion for it. And America's press did the same thick. They promoted it. In fact, one of the major football games that was on yesterday, there were a number of ads for small business Saturday. Will it's simply a way to make people aware that there are other places besides massive national chain stores to buy things. And they offer products that generally you won't find in a lot of these big national chain stores. And they offer a shopping experience that frankly is generally much better than you're going to get at a national chain store. So it's just a process for helping people understand that they can -- they should be shopping in their own communities. There are real benefits to the community obviously because the money stays within the community. But you get a better shopping experience, and unique merchandise. The other thing is that America's press has an offer on their website on the small business Saturday website that you can get a $25 -- essentially a rebate for purchases you make in small businesses, if they're part of this deal. So it's a great idea. And I think it really helps promote community businesses. CAVANAUGH: Is this a slight trend away from shopping at malls and going to more local stores? WHALIN: I think there's a trend. It's not a major trend. The fact is that the big guys have some advantages. They have pricing advantages because they have leverage with the suppliers. But they still don't have a very good shopping experience, most of them. There are exceptions. Nordstrom certainly is an exception. About you're looking for a great shopping experience, you're not gone get it at a Walmart. It's just not going to happen. But you may very well get somebody who actually cares about your business and treats you differently in a small business in your community. CAVANAUGH: My final question to you, George, is with all the emphasis of sales and bargains and earlier buying seasons and longer store hours, do you expect that that may be here to stay even when the economy improves? WHALIN: Unfortunately, I'm afraid it probably is. What's happened is that retailers are not just fighting the downturn in the economy, they're fighting each other. There's a fierce battle for the customers' attention today. The San Diego tribune yesterday had 50 inserts in it advertising today. They're all trying to get the customer's attention earlier. Upon so they started really -- many retailers started in September, advertising, promoting, displaying Christmas things. So I don't see that going away any time soon. CAVANAUGH: We have to end it, George. I've been speaking with retail consultant, George Waylan and happy holidays. WHALIN: My pleasure. You too.
George Whalin, founder of Retail Management Consultants of San Marcos talks about the holiday shopping outlook.
Instead the early hours might have simply shifted when the most avid customers hit the stores.
Target, Best Buy, Macy's and Kohl's stores opened at midnight, their earliest openings. Company executives said they opened earlier because customers wanted to have the option of beginning their searches for short-lived bargains relatively soon after eating their Thanksgiving meals instead having to wake up early Friday and because of competition for other retail chains.
"My guess is that it's just a shift," said Jackie Fernandez, a retail partner with Deloitte, a financial advisory firm, which released a report last month predicting a modest 2 percent-3 percent increase in sales for Black Friday.
"That's just enough to about cover inflation for this year. Consumers are still really cautious, especially here in Southern California. They're cautions about jobs, gas prices, and consumer savings is up at a historic high."
However, there could be a positive shift in the type of Christmas shopping consumers do this year, Fernandez said.
"I think there is a bit of pent up spending that needs to happen on basic needs," Fernandez said. "We might see clothing become the No. 1 gift, which is unusual. Gift cards have been No. 1 for a couple of years,"
Glendale Galleria Marketing Director Shoshana Puccia said that mall had a safe, fruitful early start to Black Friday. Macy's, Target and 70 of 250 other mall stores opened at midnight, with the rest opening at 5 a.m. She estimated the mall was filled with nearly 15,000 customers shortly after the early opening.
Puccia attributed the mall's lack of incidents to a close relationship with the Glendale Police Department and repeated meetings with store owners, security and neighboring businesses about plans for Black Friday. She also said mall management ensured that every entrance was open at midnight, despite that not all of the mall's stores were open.
"So far, because of the strong showing, everyone is pretty happy," Puccia said. "Macy's told us they anticipate they will do this again next year. Target did not release a lot of information, but the general manager was happy."
While there was calm at the Glendale Galleria, shopping competition turned violent Thanksgiving night at a Porter Ranch Walmart when a woman armed with pepper spray sprayed on other customers, causing minor injuries to 20 people.
The assailant then fled the scene and Los Angeles police were searching today for the suspect.
Adbusters, the Vancouver, British Columbia-based foundation which conceived the Occupy Wall Street protest, is making Black Friday the start of its "Occupy Xmas" campaign, seeking "to put the brakes on rapid consumerism for 24 hours."
Adbusters is calling for "flash mobs, consumer fasts and mall sit-ins" in an attempt to "launch an all-out offensive to unset the corporate kings on the holiday throne."
Black Friday also is Adbusters 20th annual Buy Nothing Day.
However, the anti-Black Friday efforts are predicted to have little impact.
Black Friday is forecast to be the year's biggest shopping day for the eighth consecutive year, according to ShopperTrak, the largest traffic measuring company.
A survey found that more people plan to shop on Black Friday than either of the past two years. According to the poll conducted for the International Council of Shopping Centers, a shopping center trade association, and the investment banking firm Goldman Sachs, 34 percent of consumers questioned said they planned to shop on Black Friday, compared to 31 percent in 2010 and 26 percent in 2009.
"In addition to buying gifts, consumers overwhelmingly indicated that they would be looking for bargains on Black Friday for themselves as well," said Michael P. Niemira, the council's chief economist and director of research.
The day after Thanksgiving has become known as Black Friday as it begins the Christmas shopping season where retailers achieve a profit for the year after operating at a break-even point or loss. It is also a reference to the accounting practice of using black ink, or being "in the black" to denote profits.
It is a day known for customers lining up outside stores and shopping centers in the cold -- even camping for several days -- awaiting earlier-than- usual opening times to take advantage of sale prices, some in effect for just a few hours.