Black Friday has long been the bellwether for the holiday sales season and this year’s big event didn’t disappoint.
According to reporting by The Wall Street Journal, Thanksgiving sales totaled $3.7 billion (up 28 percent year over year) in online shopping alone. The National Retail Federation expects the holiday shopping season to ring up about $721 billion between retail stores and eCommerce sales, a year over year gain of 4.8 percent for the retail industry.
More Sales, Fewer Profits
For online retailers, it’s just another year of gains, but brick and mortar counterparts are seeing sagging profit despite a boost in gross sales figures. This is because many traditional retailers have had to rethink their business models, including how they attract customers who can just as easily order any given product from a smartphone while laying on the couch eating potato chips.
Black Friday deals seem to be one of those experiences that shoppers can’t entirely abandon to the web. Although foot traffic in stores was down for the fifth year in a row through September, there were still long lines waiting for retailers to open their doors on Black Friday.
The decline in foot traffic this year was less steep than in previous years, indicating that those shoppers that will ultimately abandon physical retailers may have largely already exited the market, making more room for people who want to savor the shopping experience in person. This may also be a reflection of the investments retailers are putting into their brick and mortar locations.
“Retailers are no longer sitting on the sidelines waiting to die,” Joel Bines, a managing director with the consulting firm AlixPartners, told The Wall Street Journal. “They’ll be investing more and that will hurt short-term profits. But hopefully it will allow them to survive for the long-term.”
Spending for the Longer Term
As Bines is quick to point out, retailers have had to make significant investments to remain relevant. This has led to flattened profits that are turning investors off of retail in general. However, these investments in both online and offline experiences are likely the very things that will keep shops relevant.
Today’s shopper needs more than a good price to lure them into a physical store. Their lives are hectic, they don’t have time to pop by the market for a few things on their way home from work because the kids have to be at piano practice in the next hour. Taking advantage of delivery helps fill in those gaps.
That said, a leisurely stroll through a mercantile wonderland on a Saturday afternoon after a long week at the office can be downright cathartic. That is, provided there’s a nice atmosphere and a bit of an experience to be had. Big box retailers like Target understand this and have been investing heavily in the changes it takes to go from a warehouse feel to a retail showroom.
This is just one of many approaches retailers are finally taking to save their own skin. Despite the deep investment, it will likely pay dividends in the long-term.