This piece originally appeared on Forbes.com on December 2.  Nothing has happened to change my point of view.  I still think we’re going to see a markdown bloodbath on or about December 17, and post-holiday.  In-bound receipts are up 2.2% over last year, but so far sales are down (both numbers are expressed in dollars, not units).  That’s not a great formula.  With that as prelude, the original piece follows.  Also, this was interpreted by some as a “greedy retailer” piece.  That is not correct.  It’s more of a “silly retailer” piece.  And a sad indictment of our society:

We have only just begun to see the impact of retail sales shortfalls over Thanksgiving weekend. Repercussions will be felt through the entire holiday season and beyond.  Record sales on Cyber-Monday will do little to blunt the pain.  Those Thanksgiving Day sales were very expensive. Why?  Every sales dollar shortfall is accompanied by a payroll time-and-a-half extra charge and a dash of extra heating and lighting costs.

There’s no doubt consumers are gradually moving on-line. It’s just easier. Companies like IBM, Custora, and Adobe are able to quantify traffic, response times and sales in near real-time and were kind enough to send folks like me hourly updates.  According to Custora CEO Corey Pierson, as of 3 PM EST, Cyber Monday was well on its way to becoming the biggest online shopping day in history.  However, that still is a small enough number that it can’t make up the terrestrial shortfall.  Now most retailers have a problem. Consumers can just relax and wait.

Are there exceptions?  Jeff Bezos has to be one happy guy today.  CBS gave Amazon.com an almost priceless free promotion the night before an enormous sales day.  We may not get “Prime Air” drone deliveries any time soon, but as a “concept car” it was pretty awesome.  Nordstrom held its ground, and will be feeling almost no new pressure.  Ditto others like Costco who avoided Thanksgiving Day openings. If you want a full list, there are plenty of “naughty and nice” lists you can find all over the web. The point is really just this: opening on Thanksgiving day wasn’t the brightest idea in the world.

Long-time retail observers generally knew that opening on Thanksgiving Day wasn’t going to generate any real sales lift.  We mostly suspected it would just shift the cadence: the times of day people would actually hit the stores.  We also knew those sales would be expensive, even for those who pay workers minimum rather than “living” wage and even though promotions had been baked into corporate profit plans.  But I don’t think any of us actually expected to see a total sales decrease over 2012.  That one has me personally gob smacked.  I can’t help but wonder if the shortfalls are directly the result of promotions: in other words, did people buy the same number of items, just at a lower price?  If so, retailers should be kicking their collective selves in the shins – it’s a self-inflicted wound.

And the problem just keeps snowballing.  The industry had already increased inventory (based on inbound port traffic) by a greater percentage than expected sales increases.  That means we have even more on store shelves, in back rooms and distribution centers than we’d planned for.  Unless something changes really dramatically in the coming week, expect to see some serious markdowns come mid-December.  That product has got to be moved. Clever consumers will invest in gift cards.  That will give them maximum flexibility to buy when the prices are lowest.

All is not complete doom and gloom.  Sales consummated through mobile devices like tablets and smart phones represented 33-37% of all eCommerce transactions.  Android seems to be gaining some share against Apple, but iOS still outstrips Android as a percentage of online sales by a ratio of 4-1.  And iOS shoppers tend to spend more, an average of $127.04 per order compared to $108.25 for Android users. Mobile customers do spend money.

Still, I don’t know any other word to describe results besides “depressing.”  We won’t know the full effect until mid-January through mid-February when retailers release quarterly results. In the meanwhile, it’s time for retailers to re-think those Black Friday weekend strategies.  In the game of Markdown Chicken, it looked like retailers might have had a leg up on the consumer.  Now, the shopper is back in the catbird seat.  And while that may seem good on the face of it, in reality, it’s an economic problem.

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  1. Mohamed Amer

    Paula, another fine piece that challenges current thinking.

    The underlying assumption is that the more hours a retailer is open, the more sales can be generated – in absolute terms.  And as you stated, it was probably more of a shift than true additive sales by opening on Thanksgiving Day.  We’ll have to see how all this figures out when full quarter/year numbers are out and if it’s worth the cost on the human side of the ledger.

    On shopper opportunities ahead, retailers like to have a clean start of the year (Feb 1st), so I do expect as well some great deals starting earlier than usual.

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