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The tradition of shopping the day after Thanksgiving became known as Black Friday because sales were robust enough to provide a surge of last-quarter profits, putting retailers “in the black” for the rest of the year.
Going with the notion that if some is good, more must be better, many retailers have taken Black Friday to the extreme in recent years by opening on Thanksgiving with the goal of luring even more deal-seeking shoppers. While earlier sales may boost the bottom line for some retailers, it hasn’t come without a backlash. Some consumers are critical of those stores, saying managers would rather make money than give employees a day off. The backlash has prompted some stores to scale back and stay closed, but others continue to extend their hours.
During a recent appearance on the Knowledge@Wharton show on Wharton Business Radio on SiriusXM channel 111, Wharton marketing professor Peter Fader and Syracuse University professor Amanda Nicholson discussed the changing trends of the holiday shopping season. (Listen to the podcast at the top of this page.)
Among those trends are ever-growing sales and promotional days that have turned the season into one that is less about buying gifts and more about consumers picking up items that are sharply discounted, said Fader, who added that it is often a retailer’s least valuable customers who come out to shop on Black Friday.
“It’s about consumers waiting all year to buy stuff they were going to buy anyway,” he said. “It has nothing to do with the holiday. It has nothing to do with inventory clearance. Those strategic consumers, they’re already making their list in June and July to know what things to buy when. That’s great for them, but it’s terrible for the merchants who are just giving margin away, and they don’t really need to.”
According to both Fader and Nicholson, the Black Friday shopping strategy isn’t a smart one for retailers. Stores would be better off focusing on what they can do for loyal customers throughout the year rather than the one-time shoppers who line up at the door on Thanksgiving night.
“If retailers could only see the value of the customers, they wouldn’t be doing what they’re doing,” Fader noted.
Nicholson pointed out that “special” sales are no longer special because consumers have been trained to expect discounts just about every day of the week. If they miss one sale, another is right around the corner. “The validity of what the merchants are saying is a little weak,” she said. “It has become a game we’re all playing. It’s a little depressing because we don’t know what to believe anymore.”
“If retailers could only see the value of the customers, they wouldn’t be doing what they’re doing.”–Peter Fader
Sporting goods retailer REI is a good example of what can happen when stores balk at cashing in on Thanksgiving Day sales. The retailer last year conducted a marketing campaign to let shoppers know stores would stay closed, and it encouraged people to “get outside” and enjoy the day. Fader said while REI may have lost some shoppers that day, the campaign was a brilliant move that helped the brand by appealing to customers who were in tune with the message. And that, he added, will always boost sales.
Both experts agreed that the frenzy of Black Friday is based on broken business models and outdated ideas. With so much customer data available at so many points along the way, it’s time for retailers to take a hard look at what they are doing and realize that the holiday strategy really isn’t worth it.
“We have to change the metrics that [retailers] use, because right now all they’re rewarded on is just tonnage,” Fader said. “Let’s just push stuff out the door. But if they could see how much long-run value they’re creating — or destroying — with these kinds of tactics, they might think a little bit differently.”
Fader believes there are two paths forward to change the business model: Retailers can voluntarily begin to “ratchet down” their Black Friday activities, or they will fall in line as key retailers lead by example. Those retailers, such as foreign grocery store chains, are hyper-focused on operational efficiency.
That’s not the focus for stores that are chasing each other to open on Thanksgiving, Nicholson said. Sam’s Club stays closed on Thanksgiving while Wal-Mart, which is owned by the same company, opens to compete with Target. The strategy makes little sense considering that shoppers can buy online 24 hours a day, every day of the year.
“You’ve got the Macy’s and the Best Buys and the Kohls and the J.C. Penneys, and they’re all in a fight for their lives right now,” she said.