Early reports from Black Friday indicate that the sales totals that day were about the same as last year. But this is not as positive a note as it might appear on the surface.
- Last year, serious Christmas shoppers had already been shopping for three weeks before Black Friday hit. Black Friday was the day they finished their shopping, in many cases. This year, many did not get out to the stores until Black Friday, or perhaps Thanksgiving, the day before. They still hoped to finish their shopping obligations in just one day. This means that the total shopping is falling far short of last year.
- The deep discounts of last year have not been repeated this year. If shoppers spent about the same amount of money on Black Friday, they bought fewer things — about a third fewer.
- Shoppers were more easygoing, more relaxed, this Black Friday than on any in recent memory. They are not putting as much pressure on themselves. This confirms the surveys in which shoppers said they expect to spend less this year (30 percent less, according to one survey).
- According to reports from Friday, far fewer shoppers are spending with credit cards this year. Last year, nearly half of shoppers were paying for holiday purchases with credit cards. This year, it is only about a third. Without the credit card, it is much harder for shoppers to spend more than they had planned.
In spite of the gloomy picture for retail revenue, there is good news for retail earnings. With the credit crunch, this season is certain to be more profitable than last year. This is because, with credit hard to come by, retailers have loaded their stores with much less merchandise than in any year in recent memory. With thinner stock, there aren’t many deep discounts. And by mostly clearing off the shelves, retailers will have less to liquidate at a loss in January. To the extent that this works out, retailers will surely want to repeat this process in coming years, even if credit becomes widely available again.
In financial terms, lower revenue with a higher markup can give you a higher profit. This is good news for retailers, but bad news for the manufacturers, importers, and shippers, who have less merchandise to manufacture and deliver.