Courting shoppers

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November 22, 2010
By: Gregory J. Scott
Gregory J. Scott
// Many retailers have tried to get a jumpstart on the holiday shopping season //

A warning to the doorbusters out there, the bright-eyed, bushy-tailed shoppers revving up for the early morning retail madness of Black Friday: The holiday shopping season actually started a month ago. So if you think you’re getting a jump by lining up outside of stores at 6 a.m. on Nov. 26, think again. You may already be late to the game.

Toys ‘R’ Us unveiled its Christmas deals on Halloween. Sears got out of the gate even before that, circulating its “Black Friday Now” advertisements a few days earlier. And Wal-Mart’s been dropping prices on electronics all month.

The annual blitz to preemptively discount has made Black Friday seem almost like an old fashioned tradition. Yes, there will be a fresh round of deals on the morning after Thanksgiving. But in some places, inventory might already be reduced.

“I see a lot of discounting already,” said Akshay Rao in early November. Rao is the General Mills Chair in Marketing for the University of Minnesota’s Carlson School of Management. “And that is a reflection of somebody doing one of two things: Getting panicky and anticipating that consumer demand will drop. Or anticipating a competitor will drop prices, so we better engage in a preemptive strike.”

He continued, “So the price-sensitive consumer is going to be faced with a quandary. Should I buy now, when the prices are allegedly cut, or should I wait to see if prices will get cut even more? If I sit this week out, will that HDTV be gone?”

It’s a maddening bit of gamesmanship on the part of retailers. And it reflects a simple truth: No one knows how shoppers are going to behave this holiday season amidst still-high unemployment, dipping home values and a volatile stock market.

Downtown, the mood is less manic. Last year, St. Thomas University’s “Holiday Spending Survey” revealed that less than 10 percent of area consumers planned to do their holiday shopping Downtown. The area ranked fourth out of 11 regional malls. Since the city’s center is a lukewarm retail destination, the stakes are slightly lower.

Several retailers have resisted the trend of launching super early sales.

“We’re going to have promotions on Black Friday and throughout December [and not before],” said Paul Grangaard, CEO of Allen Edmonds. The high-end gentleman shoe store is one of the newest players in the Downtown retail scene, opening its first Minneapolis location in the skyway level of City Center last August.

“Our game plan was set up before the holiday season,” he said. “It was already set up for this economy and the zeitgeist of the American consumer. We’ve always been ‘sensible high-end.’ …  The number of people who think the way our core customer has always thought is now a much greater number.”

For Graingaard, the aggressively early sales seem a little desperate, an admission that the store does not normally offer a decent price/quality relationship. He said his store’s highest priced shoe was $325 — well below the standard for hand-made, artisan footwear. He was not sure if Allen Edmonds would host a “doorbuster” event on Black Friday.

On the discount end of the spectrum — which has attracted the most scrutiny, given the troubled economy — retailers are more willing to shake up strategies.

Target eased into the early discount fray, offering a 5 percent discount on store credit card purchases since the beginning of November. The Downtown-based chain is also promising a “much larger” and “more robust” version of their annual pre-Thanksgiving, four-day sale (beginning Nov. 21), according to spokesperson Jessica Carlson.

The Nov. 26 doorbuster has also been beefed up, with 11 additional discounts this year. And the holiday catalogue boasts 10 percent more toys, with coupons covering entire brands, instead of just individual items.

“We know that guest shopper habits are changing,” said Carlson. “I wouldn’t say that our strategy is changing. It’s more of a honing in, listening to guests and hearing what their needs are.”

Wal-Mart has placed its bet on practical items, stocking up on socks, sleepwear and underwear. Meanwhile, Target, which posted tepid same-store sales of 1.7 percent for October, has seen much of its growth in nondiscretionary categories like groceries and health and beauty.

But Macy’s saw sales grow 2.5 percent in October and anticipates a strong holiday season, which could show a still healthy appetite for luxury.

According to Rao, the marketing expert from the Carlson School of Management, this year’s  consumer could be especially difficult to read.

Asked what the holiday shopper’s mood is this year, he said, “‘Rebellious’ is one word that comes to mind. I’m looking at the election results. Rebellious, impatient.”

He warned against betting too heavily on penny-pinching, citing last year’s “frugality fatigue.”

“People were tired of scrimping and saving,” he said. “Even though unemployment was relatively high last year — as it is today — those that had jobs were beginning to look at the bright side and realize that the sky had not fallen on their heads, and the rumors about the holidays being cancelled were a trifle overstated.”

Jim McComb, president of the Downtown-based McComb Group retail consultants, still sees a lot of pessimism and worry in the consumer population.

According to the Minneapolis Area Association of Retailers, the Twin Cities median home price dropped 2.4 percent in August to $166,000 compared with the same month in 2009. And though on a national scale, October witnessed the addition of 151,000 jobs, the rate of growth is still woefully behind pace for putting a dent in the 9.6 percent unemployment.

The forecast from the National Retail Federation, which projects 2010 holiday sales will grow 2.3 percent over last year, McComb said, is “kind of an aggressive assumption.”

“And what happens on the margins is more important than what’s happening in the middle,” he added. “Those that are under economic stress, they’re cutting back can make the difference between a 1 percent increase in sales and a 2 percent increase.”

So, whether retailers offer sales earlier or later, whether they discount deeply or minimally, it’s all a gamble, guesswork aimed at deciphering a very volatile 2010 consumer.

Asked for his forecast for this year, Rao said, “Well, I forgot to bring my crystal ball in today. But I will go out on a limb and say I see no reason for any negative change relative to last year.”

Reach Gregory J. Scott at gscott@mnpubs.com.