Holiday Spending Season Begins With Decline At Brick-And-Mortar Outlets Offset By Jump In Online Purchases

There was much hope for America's struggling brick-and-mortar retail outlets that aided by plunging gasoline prices, Americans would come out in droves to chase Black Friday (and increasingly Thanksgiving) blockbuster deals on the ground across America's increasingly troubled shopping malls and retail outlets. And while there was the usual hysteria on select occasions (see this post for video evidence), for yet another year American shoppers spent slightly less money during Thanksgiving Day and Black Friday than across the same two days in 2013, according to research firm ShopperTrak. Sales at brick-and-mortar retail stores came to about $12.29 billion on Thursday and Friday, a 0.5% decrease to the $12.35 billion spent during the same two days last year.

Notably, the start to 2014 holiday spending was pulling even more demand up front, to the day when families traditionally sat at home in a post-turkey dinner food coma, with customer traffic rising by 27.3% on Thanksgiving Day compared with a year earlier, while falling 5.6% on Black Friday. Not surprisingly, in a scramble to attract as many of the early spenders as possible, more stores than ever opened their doors this Thanksgiving. Nonetheless, Black Friday is still the dominant shopping day with shoppers spending nearly three times as much, or $9.1 billion, on Friday than on Thursday.

"We’ve seen an increase in Thanksgiving shopping  over the past few years at the expense of Black Friday. More stores are opening, and earlier, which has caused a shift in shopping patterns. While Thanksgiving store visits increased 27.3%, Black Friday was down about 5.6%,” commented ShopperTrak founder Bill Martin.

What are Americans spending the most money on? Craig Johnson, president of Customer Growth Partners, a retail consulting firm, said he’s seen robust sales of consumer electronics but weaker demand for clothing. Johnson, whose team visits the 30 largest U.S. retailers on Black Friday, said many Americans still don’t have much extra cash to spend. “The top 10 percent is doing fine, but everybody else is struggling,” Johnson said. “A lot of discretionary spending has gone to monthly, recurring bills -- cable, cellphone, data plan, Netflix etc.”

Of course, there is a need to spin the data as it will hardly support the recovery theme if a year after what was said to be the worst holiday-shopping season since 2009, sales deteriorate once more.

“We need to be cautious about looking at a single day or two in projecting the season’s total,” says Martin. “In 2013, the Black Friday weekend produced a 1% gain, underperforming the 3.1% gain for the entire season. There is a significant amount energy left in the consumer with 7 of the top 10 sales days of the year yet to come, including Super Saturday which is projected to be the number one spending day of the year.”

But while conventional retail outlets remain challenged, with plunging gasoline prices not doing much to stimulate that family trip to the mall, online spending continues to rise. Sales online the day after Thanksgiving surged 22% from a year earlier as record numbers of Americans opt to avoid the mall mania altogether and just do their shopping through a computer or smartphone.

As Bloomberg reports, the gain outpaced online shopping on Thanksgiving as heavy Black Friday promotions attracted consumers, researcher ChannelAdvisor Corp. Among the biggest beneficiaries with EBay and Amazon, where spending rose by 27% and 24%, respectively, on Black Friday over last year. Needless to say, none of this provides a glimpse into the actual bottom line of retailers: it is possible that as the war for the American spending dollar heats up, that more online vendors are merely selling at zero or negative margins, arend Amazon is all too familiar with.

Some other comments from Bloomberg:

Black Friday online shopping was done less on mobile devices this year than on Thanksgiving, slipping to 46 percent from 49 percent, the company said. The rates of actual purchases also declined from Thursday, perhaps because consumers were more selective or finding hot items out of stock, Morrisville, North Carolina-based ChannelAdvisor said.


IBM Benchmark said Black Friday online sales rose 9.5 percent, and mobile sales jumped 25 percent. For Thanksgiving, mobile sales on smartphones and tablets accounted for 52 percent of online traffic.

So with the start to 2014's holiday selling season already in the history books, here are some observations from company executives on the key trends they are seeing:

Macy’s Inc. Chief Executive Officer Terry Lundgren, who opened the doors at the department-store chain two hours earlier than last year, said activewear and outerwear have been big sellers so far for men, women and children. “This is an outerwear season for the cold-weather climate stores,” Lundgren said in an interview with Bloomberg Television today. “There was a little snow coming down and it motivated people to buy more coats.”


Target Corp. showed that consumers weren’t deterred by last year’s breach in which payment-card data was stolen. CEO Brian Cornell said he was “encouraged by early results” after had record online sales on Thanksgiving, which was up 40 percent, helped by free shipping. Meanwhile, Target stores -- which also opened two hours earlier than last year -- attracted large numbers of shoppers, Cornell said in an interview.


Jesse Tron, a spokesman for the International Council of Shopping Centers, said shopper traffic was strong yesterday and today, with many consumers hunting for deals. “We’re seeing a lot of shoppers out there,” Tron said in an interview. “We’ll see how that translates into sales, but while they do browse and may make incremental sales, they’re not walking out empty-handed. Conversion rates are really strong, and if that carries over that’s good for sales.”


Matt Shay, CEO of the National Retail Federation, echoed the sentiment that consumers were turning out in force this year. The NRF’s research shows that most shoppers will head to discounters, with clothing high on their lists, Shay said. “The numbers look positive,” Shay said in an interview. “The stories we hear from the CEOs are all trending in the right direction.”

Because retail CEOs are known to be very accurate and unbiased commentators on confidence-boosting trends that result in higher stock prices and, hence, stock-based compensation... at least until the start of earning warnings season, which traditionally begins anywhere between 2 and 4 weeks after the start of the holiday season.