Monday, December 3, 2018

Retail Traffic Picks Up

A full week has gone by since Cyber Monday, and there are a few answers about Black Friday and the current holiday shopping season. Retail traffic has picked up since Black Friday. The Saturday that followed Black Friday was nearly as busy at retail as Black Friday itself, from what I could see, and that is a striking departure from the last few years. Cyber Monday showed a healthy increase in purchases from last year. The usual pattern of after-work shoppers was very much in evidence where I was last Wednesday and Thursday. Then Friday and Saturday, a week after Black Friday, were at least as busy as Black Friday was. On both weekends, shopping dropped off when Sunday arrived.

Black Friday, then, is a shopping holiday in search of a purpose. The gimmick of getting shopping families out in the middle of the night can’t be very profitable for the retailers who go all out to make it happen, nor could it be good for employee morale. The use of high-profile loss leaders on Black Friday isn’t working if shoppers get their purchases before 2 a.m. and head home, not to return to the same store for the rest of the year.

The idea of Black Friday won’t go away, but retailers are approaching it all wrong. Instead of trying to make a few one-off sales to the most hard-core bargain shoppers, retailers might do better to try to appeal to family shoppers on a day when students are not in school. A sensible Black Friday special might be on an item that parents will buy for their children with the children present — children’s winter coats, boots, shoes, and socks, perhaps.

Black Friday fell especially early on this year’s calendar, and that could have been a factor. Perhaps the low traffic on Black Friday reflects a growing split in Christmas shopping, in which one faction tends to complete Christmas shopping before Thanksgiving and the other postpones most purchases until the last two weekends before Christmas. If this is what is happening to Christmas shoppers — and it is consistent with what I am seeing — then Black Friday falls squarely in the dead zone between these two groups, presenting a special difficulty in appealing to either group. Looking at this trend, the prospect of renaming Black Friday as Don’t Buy Anything Day looks like it might have a chance.

Does the bleak Black Friday mean that Christmas shopping is reversing its trend of the last two decades, to shift from November to December? I don’t think that’s possible. A plurality of shoppers buy presents that have to be shipped to their recipients, and consumers have come to accept that such shipments have to be sent out no later than the first week of December to have reasonable assurance of arriving in time for Christmas. The people still shopping on December 7, then, either are buying just for their own household so that nothing has to be shipped or have decided to accept the possibility that their gifts might arrive several days late. I don’t see how either rationale for late Christmas shopping could increase suddenly or by very much. The current mail crisis in Canada, in which a job action has resulted in a four-week backlog of packages in the mail, is a reminder of the risks that gift-givers face by trying to do their shopping in December.

Another observation from the current shopping season is the large number of major retailers with extended online outages on Cyber Monday and the five days before. This comes after a relatively clean, trouble-free online shopping season in 2017. Maybe 2017 was a glitch, but the way I see it, the more likely explanation is that retailers have become overconfident after a clean 2017. One indication of this is that it appears that the cross-selling engines used by retailers provided the excess load that crashed web sites leading into Cyber Monday. On some sites, I have heard, the product pages loaded just fine at the same time that the front page, category pages, and search pages remained inaccessible for hours at a time. This is surely a sign that a cross-selling strategy that targeted users arriving at these pages was overloaded by the near-record volume of shoppers. Deciding what product to recommend to a specific known customer is a computationally intensive real-time process, but it was a mistake for retailers to lean so heavily on their cross-selling algorithms that their sites became inaccessible to customers who only wanted to buy a specific product. There is nothing commercially wrong with having such an advanced cross-selling strategy, but by next November, retailers will be looking for an approach that can fall back to something more efficient instead of shutting the site down when shopper traffic exceeds server capacity.

The disappearance of the Black Friday crowds has far-reaching implications for retail capacity. For a lifetime, retail floor size and parking area has been tuned to the Black Friday crowds. This year there were no Black Friday crowds. Few parking lots were more than 25 percent full at any point, and that means that the stores too were uncomfortably below their shopping capacity. Stores and parking lots alike could be half as large and still easily accommodate the peak shopping crowd of the year. Alternatively, we could get by with half as many stores. More retailers will be looking to emulate the small footprint of specialty retailers like Gap, Apple, and Victoria’s Secret, and that could lead to a decline in total retail real estate. Another scenario is that retail chains resist the need to slim down, leading to a parade of retail-chain bankruptcies over the next decade.

Returning my attention to the current season, my feeling is that we hit a brief early-December lull through the middle of next week, followed by more hectic after-work, Friday, Saturday, and Sunday shopping periods. Christmas Eve, falling on a Monday with many workers having the day off, could be busier than usual.