Question of the Day: Why Was Black Friday So Glum for Retailers?

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Dec 01, 2014
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Budgeting, Purchase Decisions, Current Events

Good opportunity to engage students on the importance of consumer spending to the health of the economy (accounts for about 70% of Gross Domestic Product (GDP)).  All economic signals seemed to be pointing to a strong kick-off weekend of holiday shopping (for definition of Black Friday);  unemployment is declining, the stock market is showing double digit gains YTD and oil prices have plummeted to multi-year lows acting as a tax cut to the tune of billions of dollars for consumers.

So, heading into the weekend, hopes were high that shoppers would turn out in force. And the results (drumroll please)…..an 11% decline in retail spending over the weekend.  Huh?  What happened?  You could survey the class to see if they ventured out over the weekend and their experiences.  Was it crowded? Did they find good deals?  If they stayed away, why?

Lots of hypotheses about why the weekend was such a dud (what do your students think?):

  • Fortune blamed the pre-Thanksgiving deals for the shortfall:  ““The consumer has gotten a lot smarter. Retailers created their own pain and suffering by bringing a lot of deals into the week before Black Friday. It diminished the excitement,” David Bassuk, managing director and co-leader of the global retail practice at AlixPartners, toldFortune. “It’s made Black Friday a non-event.”
  • The NY Times cited several theories including ongoing employment woes:  “Executives at the retail federation, which had predicted strong growth in sales this holiday season, appeared at a loss to fully explain the drop-off.  The results could show that “there are a significant number of Americans out there for whom the recession is not yet over,” said Matthew Shay, the group’s president and chief executive.”
  • The National Retail Federation noted changing shopper trends in explaining the shortfall:  “A strengthening economy that changes consumers’ reliance on deep discounts, a highly competitive environment, early promotions and the ability to shop 24/7 online all contributed to the shift witnessed this weekend,” said NRF President and CEO Matthew Shay. “We are excited to be witnessing an evolutionary change in holiday shopping by both consumers and retailers, and expect this trend to continue in the years ahead.”
  • BusinessWeek looks at trend data and questions whether Black Friday is still relevant as an indicator of how the holiday season will work out for retailers:

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About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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