Opening Day for Shoppers Shows Rich/Poor Divide
As the busiest retail weekend of the year begins late Thursday night, the differences between how affluent and more ordinary Americans shop in the uncertain economy will be on unusually vivid display.
Budget-minded shoppers will be racing for bargains at ever-earlier hours while the rich mostly will not be bothering to leave home.
Toys “R” Us, Wal-Mart, Macy’s , Kohl’s , Best Buy and Target will start their Black Friday sales earlier than ever — at 9 and 10 p.m. in some instances — with dirt-cheap offers intended to secure their customers’ limited dollars. A half a day later, on Friday morning, higher-end stores like Neiman Marcus, Saks Fifth Avenue and Nordstrom will open with only a sprinkling of special sales.
The low-end and midrange retailers are risking low margins as they cut prices to attract shoppers, while executives at luxury stores say that they are actually able to sell more at full price than in recent boom years.
“We’re now into a less promotional environment than we were before the recession,“ said Stephen I. Sadove, chairman and chief executive of Saks. In the third quarter, for instance, Saks reduced the length of an annual sale to three days from four, and excluded the high-margin category of cosmetics from another regular sale.
Retail analysts are expecting a decent holiday season, with many estimating that sales will increase about 3 percent over last year, with contributions from shoppers across income levels. Yet the Friday after Thanksgiving, the kickoff to the highest-revenue weeks for stores, is expected to lay bare the increasingly parallel universes of retailing in America, the analysts said.
“Those in a more modest income situation are the people who are going to the Wal-Marts and the Best Buys and the Targets at 8, 9, 10, 11 p.m. with little kids in tow because they can’t afford a baby sitter,” said Craig Johnson, president of Customer Growth Partners, a retail consultant firm. “It’s a very unpleasant shopping experience, frankly, for a lot of people.”
Meanwhile, many affluent shoppers will avoid the scene altogether, he said. “The women who are shopping the fourth floor at Saks are not Black Friday shoppers,” he said.
Still, a deal is a deal. High-end consumers and the people racing for the Black Friday special on $9.44 blenders at Wal-Mart continue to have at least one thing in common: they know hot holiday products go quickly.
For that reason, lines outside some Best Buy stores began forming Wednesday morning (the chain will sell a limited number of $500 high-definition televisions for $200 starting at midnight Thursday). And Neiman Marcus sold out of pewter-color Ferraris (luggage set matching the interior included) at $395,000 each within 50 minutes of making 10 of them available through its “fantasy” holiday catalog late last month.
Analysts said that luxury stores had outpaced discount and midtier stores in sales growth at stores open at least a year for most of 2011. Yet, all American consumers were still showing surprisingly strong spending patterns, and they expected that to hold going into the holiday season.
“From an overall level of spending, we’re going to be well ahead of where we were last year,” said Mark Vitner, a senior economist at Wells Fargo Securities who tracks consumer spending. “That’s surprising to a lot of folks, because we’re stuck with 9 percent unemployment.”
Mr. Vitner expects holiday sales to grow 5.2 percent this year, a higher estimate than many analysts predict. He said holiday spending had increased nearly every year recently, except for 2008, and that the population growth and even modest income growth helped buoy that pattern.
Low- and middle-income shoppers “are the folks that are really getting squeezed — in the third quarter of this year, real incomes actually declined and the savings rate declined,” he said. Yet he expects their spending to remain steady, even if they have to pull money from savings or charge items to credit cards. The economy, he said, “will affect lower-income shoppers in how they shop, not how much they buy — I think they will hone in on the discounts.”
And there are plenty of discounts, promotions and financing programs as lower-end stores try to get people to spend.
Wal-Mart’s profits declined in the third quarter as it kept many prices low so its shoppers could afford them. “There is a real sense that the economic strain is taking its toll,” Michael T. Duke, Wal-Mart’s chief executive, told analysts. It also brought back its layaway program in October for the first time in several years, and executives said the program, which lets people pay for gifts over $15 over several weeks, has brought extra traffic into the stores.
Kohl’s, like Wal-Mart, has increased its marketing to highlight its discounts, said Kevin Mansell, the chief executive and chairman.
“If you talk to people who are in my business, people who analyze our business, they would consistently tell you that stores at the mall, especially anchor stores, are more promotional than they were last year,” he said. “Now that may not be true at the high end — the strength of the business or the higher-end consumer has allowed them to do a little less promotion — but that’s high end.”
At Saks Fifth Avenue and other luxury stores, full-price selling has generally been increasing. So the few deals at luxury stores on Friday are not so much bargains as token nods to the Black Friday tradition. Saks is offering half off cashmere sweaters, Neiman Marcus is giving discounts on a future shopping trip when people spend more than $100, while Nordstrom says it does not have big promotions planned.
High-end retailers “don’t have to do anything desperate — it’s kind of hard to see a 5 a.m. queue outside of a Fifth Avenue luxury retailer,” said Chris Donnelly, a senior executive in Accenture’s retail practice. “If you don’t have to put it on sale and people are still going to buy it, why put it on sale?”