Black Friday, long the Super Bowl of shopping, is at hand, but it may have become nearly irrelevant. Check out the deals that were already on offer earlier this week:
Diamond earrings at Macy’s were chopped to $249 from $700. A Marc Jacobs bag at Saks, originally $995, fell to $248.45. And for men, a Ted Baker suit at Lord & Taylor was selling not for the usual $895, but for $399.99.
Such crazy prices are a sign of the times, and analysts expect many more such deals during one of the toughest holiday seasons in decades.
Laden with excess inventory, hungry for sales and worried because of five fewer shopping days between Thanksgiving and Christmas this year, the nation’s retailers went into a price-cutting frenzy long before the day after Thanksgiving, the traditional start of the holiday shopping season. For weeks, they have been trying to outdo one another to capture the attention of consumers who have become numb to run-of-the-mill discounts. As the latest T. J. Maxx slogan goes: “Every day is Black Friday.”
In fact, retailers have had so many early “doorbusters” — jaw-dropping deals usually reserved for Black Friday — that “it’s almost not necessary to get up at 5 in the morning,” said Bill Dreher, a senior retailing analyst with Deutsche Bank Securities.
But the retailers are just getting warmed up.
The Toys “R” Us chain is planning the deepest discounts in its history on Friday, with 50 percent more doorbusters than last year. Other retailers are promising that their deals will be even more striking than the sales they have already unveiled — with Wal-Mart, for instance, promising large flat-panel televisions for less than $400.
Such bargains are likely to set the tone for the shopping season to come.
“There’s no reason to suspect this will end,” said Dan de Grandpre, editor in chief of Dealnews.com, which has been tracking Black Friday deals for about a decade. “This kind of heavy discounting will continue until we see some retailers start to fail, until they start to go out of business.”
Indeed, the intense competition could erode profits at many chains. Some retailing analysts even fear it could condition consumers to shop only when merchandise is deeply discounted.
Still, stores plan to pull out all the stops on Friday and through the weekend. After all, November and December sales make up 25 to 40 percent of many retailers’ annual sales, according to the National Retail Federation, an industry group. (The day after Thanksgiving is called Black Friday because it was, historically, the day that many retailers moved into the black, or became profitable for the year.)
I'll be honest, I don't know what will happen with retailers on Black Friday. Consumers have already cut back their spending by 1 percent for October, so I would guess that they will continue cutting back their spending, or at least hold their spending for the Christmas season. Retailers have done some serious discounting on their prices, even to the point to where they are panicking about bleak Black Friday sales. With the U.S. now in a recession, the problems we are seeing in the financial industry, the auto industry, and the continually worsening housing woes, I believe this Christmas shopping season will be one of the worst we've seen for the retail industry in about 30 years or so. It is going to be very bad.
I also found this interesting MSNBC News story on retailers sending their merchandise back to liquidators, even before Black Friday:
NEW YORK - The holiday shopping season begins Friday with a blitz of early morning specials. For some U.S. merchants, though, it's practically over already.
Piles of jewelry, clothing and electric drills are bypassing store shelves and heading straight to liquidators by the caseload as stores try to save as much cash as they can.
Major department stores and mall-based chains have cut prices up to 70 percent to move out mounds of excess inventory stuck in the pipeline since the financial crisis hit in September and people snapped their wallets shut.
Big moves of merchandise happen every year — but usually after Christmas. This year stores are desperate to shed inventory even before Thanksgiving.
"The holiday season is over. The reason? It just never got started," said Marshal Cohen, chief industry analyst at NPD Group, a market research firm. "How cheap things are doesn't bode well for holiday success."
The deep price cuts even on luxury brands — think 40 percent off on $5,000 Chanel suits and 70 percent off on designer shoes at Saks Fifth Avenue and 40 percent off $695 Ralph Lauren leopard-printed pumps at Bloomingdale's — are only good news for the dwindling pool of consumers who are comfortable enough financially to take advantage of the deals.
Experts say discounts are only going to get even better as stores resort to more extreme measures to clear out unsold items. The value of coats and sweaters drops dramatically as the winter months wear on.
Still, there is some incentive for choosy consumers to buy early: increasingly lean inventories mean that certain colors, sizes and styles may sell out early. For those who are open minded, it's a bargain hunter's dream.
It wasn't supposed to be this bad. Stores, which typically place orders about four to seven months in advance, had cautiously planned their holiday inventories about 15 percent below last year's levels.
But because of the free fall in consumer spending, stores are now stuck with about 15 percent to 20 percent excess holiday inventory, estimated Burt P. Flickinger, managing director of Strategic Resource Group.
Richard D. Hastings, a consumer strategist with Global Hunter Securities, says the latest culprit — fear of deflation — is also causing stores to dump inventory. Clothing and other merchandise is worth less now than it was even three months ago.
"Prices are slipping too fast, and so by the time you sell the product, stores are not covering their operating expenses," he said.
But stores are only making matters worse. The more they discount and send to liquidators, the lower the prices become. Consequently, stores generate less in sales.
Still, in the current economy, they have no choice. Carrying inventory is a big expense, and stores need to preserve cash at a time of tightening credit.
At warehouses operated by Liquidity Services Inc., a leading online auction company for surplus goods, there are rows and rows of pallets of offloaded merchandise ranging from jewelry to consumer electronics.
At the company's Liquidation.com, which auctions surplus goods offered by stores and manufacturers to dollar stores and small businesses that sell on eBay, the number of auctions scheduled for the Thanksgiving weekend has soared to 2,100 — eight times more than last Thanksgiving, said chief executive Bill Angrick.
In other words, what normally happens after Christmas is taking place this weekend, he said.
"This is about survival. This is not about muddling through the holiday season," Angrick said.
Inventory has doubled from a year ago at Overstock.com, which offers brand-name merchandise at discount prices, said CEO Patrick Byrne. Stores are unloading top-notch brands such as Gucci and Prada in recent weeks at a rate he's never seen in the company's nine-year history. And more is arriving by the truckload.
So now the liquidators are seeing their warehouses filled with stock that they can't even get rid of. It makes me wonder if we're going into a price deflation spiral now, or will this be a temporary deflation until the end of the holiday season?
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