On the surface, little seems to have changed as the opening bell rang for the retailers’ battle that is the holiday shopping season. On Thanksgiving day we carved some 46 million turkeys and downed 50 million pumpkin pies despite a shortage of pecans created by Chinese consumers who imported the best quality nuts and bid the price too high for many bakers and American families to match. We watched some 12-15 hours of football, with 250-pound behemoths considered too light for many positions. Some 3.5 million people jammed the streets of Manhattan to watch the Macy’s parade, and 47 million, the largest number since 2007, took to the air and the roads, drivers benefiting from gasoline prices averaging about $2 per gallon. Some 135 million people will have shopped in stores and online by closing time Sunday, the majority having trooped to the malls.
Just like old times in the case of a willingness to gorge, travel, shop, attend football matches and congregate despite freezing temperatures in part of the country and Islamist terrorists’ attacks on Paris – Obama took to television to assure Americans that he and his security team are “on the case”, that team including Homeland Security, responsible for TSA employees who failed to detect weapons brought on flights by investigators 95 percent of the time.
But not like the past when it comes to consumers’ ability to spend and how we shop and what we buy. For one thing, consumers have more ability to spend than they have had in recent years. The jobs market has improved, inflation is nil, incomes are up, and Americans last month saved a larger portion of those incomes (5.6 percent) than they have in the past three years. So consumers, who account for about 70 percent of the nation’s GDP, can and will probably spend this holiday season. But the pattern of spending is less likely to mimic that of past years.
No longer do shoppers prowl department stores in search of the latest fashions, even if deeply discounted. Instead, this year they seem to be spending their money on four things:
· In defiance of the trend away from “stuff”, anything with “Star Wars” on it is being snatched up, to the likely tune of $4 billion, driving toy sales to a 10-year high, and Apple watches and iPods seem to be doing surprisingly well.
· Cars are flying off the showroom floors (pun intended) in response to attractive discounts and a three-day weekend that gave buyers time from work to test-drive and savor that “new car smell”, perhaps after checking prices on the web.
· House furnishings, practical and beautifying continue to drive sales in DIY and related chains.
· “Experiences” — dining out, spa treatments, hobbies – were not “hot” items, but have steadily claimed am ever-larger portion of consumers’ cash otherwise available for Black Friday.
Some bricks merchants are taking the advice offered by Anna in “The King and I”, and whistling a happy tune so no one will suspect they’re afraid. Gerald Storch, CEO of Hudson’s Bay Company, which owns high-end Saks Fifth Avenue and Lord & Taylor, sees no enduring trends that threaten his bricks. “Cars instead of clothes, the Internet reaching a tipping point – I’ve heard every theory imaginable. But Christmas always comes, and people have to shop. They will be back,” he says in an apparent effort to “fool himself as well” as his interviewer. Macy CEO Terry Lundgren is not fooled. He is selling stores that have been made redundant by the chain’s rising Internet sales.
We will know more on Cyber Monday, and when the sounds of Auld Lang Syne finally fade away, but two things are already clear: The weekend is shaping up as a good (although some analysts add “not great”) start to the holiday season, and online sales will increase by more than three times the growth in total sales being forecast by the National Retail Federation (12 percent vs. 3.7 percent). Not that the malls have been empty this weekend. Fanciers of a stainless steel toaster ($7.99), or 14-piece Cuisinart ceramic cookware set ($89.99), or Nikon Coolpix L340 ($99) lined up at Macy’s or Target, with the latter selling an iPod every second on Thanksgiving day and both ringing up record online sales. This weekend’s problem for many retailers is that technology allows instant price comparisons, putting consumers in the driver’s seat, that consumers have become accustomed to deep discounts all year ‘round, and are aware that many prices have been raised in November and “discounted” back to October levels on Thanksgiving day. They also know that dragging a weighty package from a crowded store is so yesterday.
Amazon bestrides the “free” delivery Internet industry like, well, like the powerhouse it is. Many analysts believe that Jeff Bezos has erected an unassailable fortress at Amazon, with an estimated 44 million loyal “Prime” customers ($99 per year for “free” 2-day shipping), and warehouses dotted around the country to deliver what customers want in record time. Bezos knows better. Given the pace of technological change and still-vibrant American entrepreneurship, there are no unassailable fortresses. Doubt that and recall the names of Kodak in photography, Smith-Corona in word processing, and Xerox in copying.
Retailers such as Macy’s are upping their Internet games. So is eBay. Target offered “free delivery.” Then there are wannabees. Dilatory hosts and hostesses could call start-ups able to deliver a bottle of wine (Saucey, Thirstie Inc) or stuffing mix within an hour or less of receiving a panic call. The significance of these developments transcends turkey day. Which is why Bezos is not standing still. He is not quite in the position of Marshall Foch during the Great War, “My center is giving way, my right is retreating, situation excellent. I am attacking.” But he does face multiple threats, and is indeed attacking. Amazon is experimenting with drone deliveries against the day when bricks add more clicks to their weaponry, closing stores in the process, new entrants deploy their own drones to create cheaper paths to customers’ doors, Uber treats packages with the same efficiency as it now does humans, and some app developer does what is now unimaginable. Bezos also counter-attacked department stores invading his Internet turf by starting special on-line sales almost a week before Thanksgiving, and escalating the war from mid-afternoon on Thanksgiving Day, when an estimated 22 percent of all shoppers beat the Black Friday mobs on what is now called “Grey Thursday”. “Skip the lines and shop … from anywhere, even your couch” advises Amazon.
More choice of price and vendor is a plus for consumers. A good start to the holiday season is a plus for the economy and ammunition for Fed policymakers who want to raise interest rates in a few weeks. And The Force is certainly with Disney, offsetting some of the problems cable-cutters are creating for its ESPN money-spinner.
