Is Black Friday still a true indicator of retail health?

Is Black Friday – that perenially fascinating shopping day/media spectacle after Thanksgiving – still a predictable indicator of year-end retail health? And American economic health in general?

The term Black Friday dates back to the 1960’s, originally describing a high-traffic day dreaded by employees; but in the 1980’s the term came to symbolize the day when a retailer’s sales would determine whether they would end the year positive (black) or negative (red), given the traditional (if antiquated) rule of thumb that January – November were considered break-even months for retailers.

But the American tradition of Christmas shopping the day after Thanksgiving goes back much longer, at least into the 1920’s. Three quarters of a century later, this retail tradition can faithfully call this ritual a part of the American fabric. If New Year’s Eve is the night we give ourselves permission to lose ourselves, Black Friday is surely the event Americans permit themselves to shop without restraint.

Black Friday 2008 revealed a dark side to this fabled tradition. In a Valley Stream, Long Island Walmart, a seasonal employee was trampled to death as a frenzied crowd of supercharged 5:00 a.m. shoppers broke through glass doors minutes before the opening hour. Near Los Angeles, two apparent rivals squared off in a fatal shootout that left both dead at a Palm Desert Toys ‘R Us. While these unrelated took place a continent apart, the deep-seeded hysteria surrounding Black Friday shopping cannot be ignored.

Today, the National Bureau of Economic Research announced that America is has been in a recession for a year, possibly the worst since World War II. This comes as no surprise to most ordinary Americans. But on November 28, 2008, retail sales were surprisingly high. According to the National Retail Federation, the average Black Friday shopper spent $372.57, a 7.2 percent increase over the previous year. (Traffic trailed off on Saturday and Sunday.)

Economy down – sales up? That doesn’t compute. Many speculate that 2008 Black Friday sales indicate weakness, not strength, in retail and the economy as a whole. This year, many retailers opened their doors at 4:00 a.m. on Thursday, offering short-term offers (“4:00 – 9:00 a.m. only!”) and limited availability (“minimum 10 per store”). These tactics generate foot traffic and sales, but they also generate chaos and bad will. Moreover, the traditional measure of sales per person does not take margin into account; in other words, many retailers trade profitability for volume when they offer rock-bottom prices on a limited basis.

Today is also Cyber Monday, the day contemporary shoppers turn to the internet for rock-bottom bargains unavailable the rest of the year. This year, 36 percent of American consumers say they will spend half of their shopping budgets on the web, according to a Nielsen online survey, up from 32 percent in 2007. Just as brick-and-mortar retailers are offering unprecedented incentives to
shop fast and early, online retailers are focused on multi-unit discounts and
free shipping.

Returning to the original question, is Black Friday still a true indicator of retail health?

No way. In the current uncertainty of the American economy, Black Friday has become in fact a false indicator of retail health, or for that matter, general economic health.

Is Cyber Monday a better indicator? Too early to tell, but probably not.

This year, the old rules are off. Compared to any other time since economists have predicted retail health, Black Friday has less meaning than ever as an economic barometer. Our guess is that retailers that offer high-quality goods at reasonable prices, provide a comfortable and convenient shopping environment, maintain high levels of customer service, and innovate across traditional and digital spaces, have the best chance of survival in the current economy.

Stay tuned.

Photo Credit: Associated Press