As Black Friday gets into full swing in the US later today, retailers are battling to take advantage of the expected spending spree as the unofficial start to Christmas shopping begins.
High street retailers and pure play e-tailers alike have introduced discounts and promotions on thousands of products as shoppers shift their focus to Christmas following yesterday‘s Thanksgiving holiday.
US retailers Target and Wal-Mart, which owns grocer Asda, began their offers earlier than expected and are driving sales with promotions on electricals such as the recently-launched Windows 8 and iPads, creating a new wave of competition.
“Black Friday is morphing into a ‘Blue Thursday‘ as stores open earlier each year,” said Jon Copestake, Retail Analyst at the Economist Intelligence Unit.
“With the likes of Wal-Mart and Target pushing forward opening times, US retailers are taking an increasingly ruthless approach to holiday shopping, with the Thanksgiving table barely cleared before shopping begins.
“This may be welcomed by thrifty bargain hunters in the current climate, but there are drawbacks. Wal-Mart, for example, has angered unions in the US prompting threats of a Black Friday walkout.
“While traditionalists will enjoy the sight of eager shoppers camped outside stores, the rapid growth of Cyber Monday could see the online shopping frenzy eclipsing its bricks-and-mortar equivalent one day.”
Cyber Monday falls next week in the US and is the biggest online shopping day of the year, while the UK‘s busiest e-commerce day falls on Monday December 3rd 2012 with predictions that consumers will spend 115 million hours shopping online on the day.
It is expected that today‘s retail and online spend will eclipse last year‘s despite a slow economy and weak consumer confidence and last year, Americans spent a record $52 billion (£32.6 billion), according to the National Retail Federation, with 226 million shoppers visiting stores and websites over the course of the day.
While this undoubtedly presents a significant opportunity for the retail sector given the struggles of the past year, Tristan Rogers, CEO of ConcretePlatform.com, warned that heavy discounting may cause long-term damage to retailers.
“With the lead up to an event like Christmas, all the high street retailers start watching each other like hawks, waiting to see who makes the first move,” he commented.
“In this case, the move in question is the ‘big discount weekend‘ which marks the start of the run up to Christmas.
“The issue of course, is that when the retailer commits to the price slash, they will be losing margin on product, so the gamble is that they make up for margin erosion in quantity and churn, therefore clearing the floors for new product.
“The first mover gets the advantage, as they hopefully benefit from the pent up demand for a good discount. However, bolt early, and the pent up demand is not quite there and you end up discounting for no big turnover advantage.
“Secondly, such is the paranoia of the high street, that once one retailer starts, the rest follow. If the dynamic was applied in reverse, it could be seen as price fixing.
“The US and UK high street markets are so poor at the moment that retailers are looking at these rallies as a means of defibrillating the moribund market into life.
“The more reliant they are on the one market, the more stunts like this they need to pull. It‘s a downward spiral.”