Bleak Friday

Get ready. The stories about Black Friday will start ramping up today. And by the time you awaken from a tryptophan induced haze on Friday morning,  you can expect your TV to be chock-a-block with shots of reporters standing outside Walmarts and Best Buys and Apple stores and within some big fancy mall opining on what it all means.

Spoiler alert: it means nothing. Absolutely nothing.

As the hype grows I thought I’d weigh in with a few facts.

Black Friday is not the biggest shopping day of the year. In recent history the Saturday before Christmas and the day after are the biggest. In fact, several other days right before Christmas will likely rival Black Friday’s sales volume this year.

It’s declining in importance. As online sales continue to grow, while brick & mortar sales are at best flat, the relative share of total holiday sales done in stores on Black Friday is decreasing. When you marry that with a trend toward early release of Black Friday deals, Thanksgiving Day store openings and growing terrorism fears, more and more Black Friday matters less and less.

Black Friday success (or failure) is mostly meaningless. Many folks have tried to determine the correlation between the industry–and individual retailer performance–on Black Friday and how the total holiday season will turn out. There is none. So move along. Nothing to see here.

For consumers, it’s mostly a con. Study after study shows that, with few exceptions–mostly the heavily promoted, limited quantity “door busters”–the savings just aren’t that good. In fact, prices tend to be better in December. With many retailers sitting on higher than anticipated inventory levels going into the holiday, I’d predict the best deals will come late in the season, including during the week after Christmas.

The customer experience is terrible. With over-flowing parking lots, teeming throngs, long checkout lines and, in some cases, a need to camp out hours before the doors open to have a chance of scoring an actual great deal, shopping on Black Friday is the ultimate  soul-crushing hassle. Apparently some people thrive on this sort of thing. I hope they get the help they need.

Now about Cyber Monday….


Holiday Sales · Retail

Black Friday, Cyber Monday and the din of irrelevant analysis

During the past week–unless you were blissfully disconnected from all sources of media–you were likely inundated with news articles, tweets, posts and endless TV stories about Americans as weapons of massive consumption.

Reporters and pundits alike pontificated about the significance of earlier and earlier store openings, the relentless quest for the best “door busters”, the incredible growth of on-line shopping and the startling (to some at least) emergence of mobile apps.

Casting aside the glaring irony that after spending a few hours (allegedly) being grateful for all that we have, we quickly pivot and decide that, after further review, we don’t have nearly enough, much of what the media shares about the significance of our shopping habits during the past week is highly misleading.

Consider a few facts. First, historically there has been poor correlation between retailers’ performance during the Thanksgiving weekend and their overall performance for the quarter. In fact, there is growing evidence that there is an inverse correlation. Second, for most brands, Black Friday and Cyber Monday represent a small percentage of total sales for the holidays. Third, with Thanksgiving coming early this year, holiday sales are going to be more back-loaded than usual. Fourth, as more brands launch promotions prior to Black Friday, consumers spread their sales over more days, making any single event less important. Fifth, sales aren’t profits. Giving product away, and driving an abnormal amount of business to one or two days, wreaks havoc on profitability.

For those of you who breathlessly conclude that a given retailer “won” because of big increases on a given day or that Cyber Monday was a huge success because of a double-digit sales gain please realize the jury is still out.

A quick anecdote: when I was at Neiman Marcus we kept sweetening the deal on our thrice yearly InCircle Rewards promotion. Every time we added a new element our comp stores sales went up nicely, and it appeared that the incremental cost of the promotion was more than covered by the extra gross margin dollars we gained during the multi-day event.

Then a member of my analytics team wondered if anyone had looked at the possibility that as we made the deal better and better perhaps we were driving sales that would have occurred anyway (at a higher margin) into those sales days. Great question. So we did the analysis.

Lo and behold a comparative analysis that included a week before and after the event showed clearly that there was no appreciable increase in total sales. There was a change however. Our profits got worse.

The lesson is clear and compelling. Concluding that a sales event was a success without a more complete picture of how consumer behavior was changed over a longer period of time AND without including a profitability analysis is irrelevant.

I can hope that the media will pull back on disseminating useless information or that they will at least provide more helpful context. Not very likely, I know.

But there is one thing I can do. I can pay less attention.

And so can you.









Hype-y Holidays: The Mythology of Black Friday and Cyber Monday

The media hype around “Black Friday” and “Cyber Monday” is already at a fevered pitch–and the din will only grow louder over the next few days. But can we get real for a moment?

To be sure, these are very large volume days. Black Friday sales will likely push $20 billion, and Cyber-Monday revenues are virtually (ha!) certain to be record-setting. But consider a few facts for a moment.

First, studies have shown that retailers’ performance on these two days has little or no correlation to their total holiday performance.

Second, the relative contribution of these two days to total holiday spending is small (for e-commerce players only about 4% of total holiday season sales are done on Cyber Monday). And given intense promotional activity, gross margins are skimpy at best, meaning the relative contribution to profits is even smaller.

Third, with quite a few brick and mortar retailers opening on Thanksgiving–and many online sites advancing “door buster” promotions to today and tomorrow–sales will get spread out a bit more than last year’s spending pattern.

Lastly, a lot can and will happen between Cyber Monday and Christmas.  A look at last year’s data from comScore strongly suggests that there are many large shopping days ahead.

 Top 10 Online Spending Days of 2010 Holiday Season
Date Spending $MM)
Monday, Nov. 29 (Cyber Monday) $1,028
Monday, Dec. 13 (Green Monday) $954
Monday, Dec. 6 $943
Friday, Dec. 17 (Free Shipping Day) $942
Thursday, Dec. 16 $930
Tuesday, Dec. 14 $913
Tuesday, Nov. 30 $911
Wednesday, Dec. 8 $901
Thursday, Dec. 9 $898
Tuesday, Dec. 7 $880

Stated simply and Yoda-like, two days do not a successful holiday season make.

Retail · Surgical Shopping · Uncategorized

Retail’s holiday “game of chicken”

By most accounts the holiday shopping season got off to a solid start with strong late November sales and a record Cyber Monday.  Though given the historically high level of discounting and rampant free shipping it was likely “profitless prosperity.” But why worry about little details such as actually making money.

So now, with only 18 days of shopping left before Christmas, the real fun begins. And so does the game of chicken between consumers and retailers.

Despite feeling a bit more optimistic, all but the wealthiest consumers are facing a pretty uninspiring economic outlook.  And study after study shows that consumers are still engaged primarily in “surgical shopping”–emphasizing needs over wants and remaining keenly focused on getting a great deal. Retailers, by turn, are hoping to not only drive strong same store sales, but improve their gross margin performance. And here we have our stand-off.

The reality for most consumers is that they are unwilling to pull the trigger unless they see obvious value.  The reality for retailers is they are unlikely to cede market share or risk getting stuck with large markdowns.

So let the game of chicken begin.  My bet is that the retailers blink first.



Holiday Hype Part II: The Unimportance of Cyber Monday

You would think that with all the hype around “Cyber Monday” it must represent a very significant percentage of holiday e-commerce sales. You’d be wrong.

For perspective, here are the top on-line spending days of 2009 according to comScore:

1.   December 15 $913 million

2.   November 30 $887 million (last year’s “Cyber Monday”)

3.   December 1  $886 million

4.   December 16 $874 million

5.   December 14 $854 million

6.   December 10 $852 million

7.   December 8 $828 million

8.   December 17 $809 million

9.   December 3 $809 million

10. December 2 $797 million.

Given the strong growth in e-commerce, this year’s Cyber Monday sales will likely approach $1 billion.  That’s an impressive figure, but it will still represent only about 4% of total online holiday sales.

Oh and by the way, studies have shown that performance on Black Friday and Cyber Monday has no correlation to how retailers will fare for the entire holiday season.

So all the hype may fuel the 24 hour news cycle, but it isn’t very telling.

Sorry to be a buzz kill.