Black Friday a Win But are Retailers Giving Away the Farm?

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Bargain hunters shop for discounted merchandise at Macy's on 'Black Friday' on November 25, 2011 in New York City.

The results are in. According to Shopper Trak, sales increased 6.6% on Black Friday. Consumers were inspired by record breaking discounts and store openings as early as 9 p.m. on Turkey Day. That was enough to get the average American to skip dessert, push back from the dinner table and hit the stores in search of savings.

For all the negative press about early openings eating into family time and sad-faced employees who had to show up early and therefore did not have much of a holiday, the early rush was a success. Employees did receive over-time and consumers welcomed the opportunity to take advantage of discounts to self-gift, fill stockings and maybe work off a little turkey and pumpkin pie. Apparently a win-win situation for all involved.

In the name of research I recruited family members and hit a local Wal-Mart at 10 p.m. Thursday. I have to give kudos to Wal-Mart. Yes there were a few incidents (the pepper spray lady in California trying to protect her focus on cheap games) but Wal-Mart did everything in its power to promote a safe, orderly Black Friday (if there is such a thing). Consumers rushed the doors and headed for the top promotions: Xbox, TVs, games, toys and apparel. While there was plenty of potential for being run-over, Wal-Mart had a plan this year unlike many retailers.

First, a map of promotions. A map and balloons indicated where to line up for specific category discounts and numbers were handed out for limited quantities. By the time 10.15 had rolled around you were out of luck. The early birds got the worm. While I could have received a “ticket” for the Emerson TV special at 10 p.m., I was told I would have to stand there for 2 hours. Check out was starting at midnight. I was told not to worry I could get a “hall pass” for the restroom with a 15 minute maximum. No thanks.

Games were chaotic as $60 titles were reduced to $15. Of course quantities were limited. And surprisingly, I was told there was no control on how many titles I could purchase. Can you say arbitrage opportunity? The pepper spray lady clearly thought so.

Off to the Xbox promo. Forget it. I did not run fast enough to secure a ticket. Ditto for laptops under $300.

Apparel? Children’s was mass chaos. Unbelievable promotions. Consumers grabbing whatever they were able fit in their arms. That is where the elbows came into play. I felt like I was back on my high school basketball team.

Wal-Mart has a renewed focus on EDLP (every day low pricing) and has also brought back 10,000 items of inventory the company had previously eliminated. That campaign is clearly paying off as traffic increased in October for the first time in recent history. Killer Black Friday promos should keep the momentum moving in the right direction.

And funny enough, with all the tools available to cross check prices via smartphones, the buyers I polled on BF (especially in the TV category) could not tell me how good of a deal they were getting. For example: "wow that large screen TV is $400", but what was the original price? "Don’t know the answer but seems like a great deal." Same response from those lucky laptop ticket holders.

While consumers may be lured by door busters on Friday and not really know how great the “deal” is, Wal-Mart and other retailers will clearly take a margin bath on Black Friday in the hope of creating a sense of loyalty and gaining market share.

Yes, Black Friday was a win from a traffic and sales perspective. But the real question is… did retailers just give away the farm?

Stacey Widlitz is the President of SW Retail Advisors Inc. She has worked at UBS, SG Cowen, Fulcrum Partners and in 2005 was one of three analysts to launch the Research Department at Pali Capital, where she covered Retail and Home Video for 5 years.