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"Bleak" Friday 2015: A Perilous Season Ahead for Retailers?

Posted By Administration, Thursday, December 10, 2015
Updated: Wednesday, December 9, 2015

by Dwight D. Hill, McMillan Doolittle LLP


On a rainy, cold Black Friday two weeks ago I went to one of the local malls to check out the crowds. I was shocked – I drove right up to one of the department stores, walked in and saw neat displays with very few crowds. I had to check my watch to make sure I had the date correct! The crowds came later, but brick-and-mortar traffic was definitely down for Black Friday 2015. According to Shoppertrak, in store sales were down 10.4% versus 2014.1 So what is happening? Will it be a "blue" Christmas for retailers? Here's some perspective on the retail trends we're witnessing:

1. Promotion creep. Black Friday promotions have crept over the years earlier and earlier in the month of November, with many beginning this year on November 1st. The result is an incredible dilution of the Thanksgiving shopping weekend. Combined with Thanksgiving Day openings, the pie is simply divided over a greater amount of time. The result: The sales over the holiday weekend appear softer.

2. The shift online continues. Why wait in line or get out the door at 4:00 am when you can shop online? This year, the trend hit a record – Thanksgiving Day through Cyber Monday netted a record $11 billion in sales, a 15% increase over 2014 according to Adobe.2 Cyber Monday also turned out to be one for the record books – it was the largest online sales day in history, hitting $3 billion in sales.3 These online sales certainly influence brick-and-mortar sales, but when it comes to Black Friday crowds, it looks like a lot of folks chose to avoid the madness and shop online instead. The result: Retailers' e-commerce businesses will set sales records, with margins pressured by all of that free shipping.

3. Third quarter sales were soft. We saw a who's who list of retailers including Macy's, Best Buy, and Nordstrom report disappointing quarterly results recently. What this means is inventories are likely higher than planned, which means a raucous promotional holiday season ahead, particularly later in the month if sales don't materialize as planned. The result: Yet more margin pressure to clear through holiday inventories.

So will we hit all of those holiday sales predictions? We will see, but one perilous fact is certain – retailers' margins this year will certainly be in a race to the bottom.

[1] http://www.shoppertrak.com/media/press-release/in-store-retail-sales-decline-on-black-friday-weekend/
[2] http://www.adobe.com/news-room/pressreleases/201511/113015AdobeDataCyberMondaySales.html
[3] http://www.usnews.com/news/business/articles/2015/12/02/record-cyber-monday-spending-tops-3-billion


Dwight D. Hill, whose background includes leadership roles with Neiman Marcus and Deloitte LLP, is Partner, McMillan Doolittle LLP. Dwight can be reached at dhill@mdretail.com. Learn more about our services and perspectives on retail by visiting us at www.McMillanDoolittle.com.

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Tags:  Black Friday  Brick-and-Mortar  Cyber Monday  Holiday 2015  Omni-Channel 

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