Does a Great Black Friday Mean a Holiday Season of Strong Sales?
Retailers are celebrating a great start to the holiday shopping season this week. Sales on Black Friday and the weekend that followed soared past expectations. This period often foreshadows the strength of overall holiday sales. So will Americans spend far more this year than last year, or is there some other possible explanation for why Black Friday shoppers were so eager to spend?
First, just how strong were sales? Although official tallies won't be available until later this week, some preliminary estimates are pretty optimistic. Andria Cheng at Dow Jones Newswires reports:
The number of people who shopped at stores and online between Thursday and Sunday jumped 8.7% to 212 million shoppers, according to a National Retail Federation survey of 4,306 shoppers conducted by BIGresearch. The total amount spent during the four-day weekend reached an estimated $45 billion, with the average spending rising 6.4% to $365.34, the survey showed.
That 6.4% increase for Black Friday appears to have soundly beat expectations of 2% to 3%, though some other estimates don't predict as impressive performance. Still, if sales are significantly higher for Black Friday than they were last year, this would generally indicate that holiday shopping overall will be quite robust. That is, unless there's some other explanation.
Unfortunately, there could be. If you happened to look at any of the retailer circulars advertising the Black Friday deals, then you saw just how deep the discounters were at some stores. There were crazy deals like $10 toasters and coffeemakers. LCD television prices were bordering on ridiculous with 40" TVs at prices below $400.
So instead of a strong Black Friday indicating lots of additional holiday sales to follow, you might be seeing still stingy shoppers soaking up the insane deals before they're gone, with less intention to shop as freely in subsequent weeks. Consumers who cut their spending broadly generally make sure good deals are present whenever they do shop. So a very strong Black Friday might have been predictable, since struggling Americans are very hungry for big discounts.
And just how has the economy changed from November 2009 to 2010? Unemployment has dropped from 10.2% to 9.6% from October 2009 to 2010. Over the same period, annualized personal income is up 4% from $12.2 trillion to $12.7 trillion. Third quarter gross domestic product has risen from 1.6% to 2.5% from 2009 to 2010. Finally, the S&P 500 was up nearly 8% from Thanksgiving 2009 to 2010.
So American consumers should, indeed, feel a little bit better about their economic surroundings this year. The question is: how much more comfortable? For retailers, there's a big difference between a 2% to 3% increase in sales and a 6% to 7% rise. We'll have to wait until the holiday season is over and all receipts have been counted to know for sure.