The real story behind "Black Friday"
With retailers like Target now opening at midnight on Black Friday, do you think this will really up sales?
Yes, it will bump sales. But stores are always robbing Peter to pay Paul. Because, if you're buying it one time, you're not buying it another time. There's planned cannibalization of sales there. You're urging someone, instead of coming out at 3 a.m., to come out at midnight. Now the question is, are you going to steal customers from other stores? The short answer is, yeah, the other stores aren't open.
How long is this going to last? In terms of years, not many. It's what I call "retail one-ups-manship." They just continue to try and one-up each other. And eventually the effect is diluted. Consumers get very used to it, it's not special anymore. The deals are running for weeks now.
And, I think the idea of online sales is really going to jump the shark, and the whole thing will peak and sales will start spreading out again. But I think online sales will rob a lot, don't you?
Well, yes. But I think there can be two distinct types of shoppers: Those who online shop, and those who shop in the store. Is there a lot of crossover with those shopping habits?
You see it a lot when the weather gets bad. People will forgo their brick-and-mortar purchases and shop online. There tends to be different kinds of shoppers, yes, but online sales do take a bigger chunk of retail sales every year. Which means they're stealing from brick-and-mortar sales. It's just not as fast as everyone thinks it is.
But you've got online sales going, and I think "Cyber-Monday" was just coined a couple years ago. It was in a press release, which means a PR person wrote it. So that one was planned. And then last year American Express came up with "Small Business Saturday."
"Small Business Saturday" is now being pushed really heavily.
Yeah, it's their whole gimmick -- the Black Card. American Express caters to small businesses, that's their whole target market. So its really in American Express's best interest. But consumers will get numb and desensitized to all of it. Frankly, since the recession, there have been so many deals all the time, that I think there is a huge expectation consumers are just going to get, you know, with Groupon and everything, 15 to 70 percent off. Honestly, most retailers can't survive with that sort of discount.
Retailers don't have heavy margins, anyway, for the most part. Their margins are a lot tighter than manufacturers. You've got raw material prices increasing, and it brings a lot of price pressure upward. Which means if retailers discount, they have to buy a heck of a lot more than they used to, get some volume deals so they can offer those point-of-purchase discounts. And it just kills.
That's the whole problem with the Groupon model, is that consumers don't want to pay the regular price.
It sort of negates the definition of a "sale price."
Right. The idea behind "sales promotion," the definition, is "a short-term offer of value designed to illicit a response." They have to be short-term. And the idea is that someone is going to respond. So, couponing two-for-one and all these types of sales promotions that we have, when you overuse them, consumers eventually become desensitized. And then they expect it. If it's not a deal, they won't buy it. That's just bad merchandizing, bad strategy.
You keep discounting to get rid of inventory and cash flow, and then you wonder where the profits are -- and then you wonder where the return on investment is. You're supposed to use it to entice new customers to try your product. And then it somehow turns into "hey, lets reward all our current customers because they want to be treated like new customers." It's like a drug. You use more and more of it. And I think a lot of these retailers are pretty cracked out now.
Its like, "do consumers really demand this? Are they really going to do less holiday shopping without all this stuff?" I don't think that anyone has proven that they will.