By Brian Kilcourse, Managing Partner
December 1, 2009
“People are making it really easy for us”, said the Sears appliance salesperson, “instead of asking a bunch of questions, they just point at something and say ‘I want this’. They’ve really done their homework and they know exactly what they want – they just come in, buy it, and get out.” That accurately summarizes RSR’s observations on Black Friday in Roseville, California (near Sacramento). Shoppers flocked to take advantage of “doorbuster” and Black Friday super-specials and often walked right past regularly priced and even promoted seasonal items in order to take advantage of the one-day bargains. Although hot pricing was in abundance, consumers were focused on their mission, and weren’t in a treasure-hunting “discovery” mood. They knew what they wanted and where to look for it.
Our early Friday morning visit to the Roseville shopping mecca is really the story of three different shopping environments that are all within one square mile. Our first destination was the Westfield mall. Westfield is a “typical” modern indoor mall, anchored by Nordstrom, Sears, Macy’s, and JC Penney. Although traffic was good at the mall, it wasn’t spectacular – in fact, we spent most of our time looking for a line that would indicate some unusual excitement. One consistent observation is that stores that had the modern equivalent of barkers in front of the store declaring doorbuster specials tended to get the traffic, while those that didn’t, didn’t. For example, a Disney Store greeter stood at the door offering special “share the magic” coupons to shoppers that guaranteed an additional 20% off of the entire purchase before 10 AM. “It’s getting close to 10 o’clock,” confided the employee, “but we don’t want you to feel rushed. As long as you have this coupon, you’re good until noon!” Not surprisingly, the Disney Store was packed with moms taking advantage of $5/$10/$15 specials with the extra 20% off. On the other hand, various of the Gap brands (Gap for Kids, Baby Gap, and Gap Body) only had window signage declaring BOGO promotions -“Today! Today! Today!” Missing were shoppers. But the most glaring comparison was Abercrombie & Fitch vs. American Eagle Outfitters. American Eagle was on fire, offering 20% off of everything (until noon). “It’s busy”, said the American Eagle greeter, “we opened at 4 AM – we just keep running things out (to keep the floor stocked). After 12 noon, we have a ‘peel and reveal’ event – you get a card and it gives you a special discount.” He jokingly said, “I’m not sure we’ll have anything left after today – it would make my life easier if we don’t!” Inside the store, which was packed with young shoppers, a red tee-shirted employee was standing on a counter announcing discounts on various items, adding “don’t forget- you get 20% off on top of that until noon!” Abercrombie was jammed too – with clothes, not people. A&F was offering a $25 gift card with a $100 purchase, but that wasn’t creating any detectible buzz in the store. No barker, no buzz. Our assessment – A&F is out, American Eagle is most definitely in.
The second shopping environment is a tony outdoor mall called The Fountains, anchored by a beautiful Orvis store and a Whole Foods. The Fountains motto is “so unexpected”, and it was indeed unexpected that nary a shopper wandered among the storefronts. But as one sales person there said, “These stores don’t do discounts,” and they were rewarded by cost-conscious shoppers in kind.
Finally, there’s a big-box power center just a traffic light away, with the inevitable Best Buy, a Nordstrom Rack, an Old Navy, and a Babies“R”Us, among others. At Best Buy in particular, the place was jammed with people fighting over both parking spaces and shopping carts – Kris Kringle would have been embarrassed. Best Buy was blowing out the doors with one-day specials on electronics of all kinds – but especially flat screen LCD TVs. One shopper expressed her reasoning very simply: “We’ve needed a new TV for awhile, and were just waiting for the right price – and we found what we wanted, cheaper than at Costco.” Was it worth the hassle? She insisted, “We got a good price!”
The most telling indicator of the bargain-hunting nature of this Black Friday was seen at H&M at about 10:15 AM. H&M caters to young shoppers who want to look in-fashion without breaking the bank. There was ample evidence that a storm had just passed through the store. The rounders were a mess, the dressing room looked like a bomb had hit it, and the special item tables were decidedly picked over. It was a store employee’s nightmare. But at 10:15, just a few minutes after the end of the doorbuster specials, the place had virtually emptied out – giving exhausted staffers plenty of opportunity to clean up.
We also received some corroborative feedback about focused holiday consumerism from the Wasilla, AK contingency of our mystery shopping team. Readers will recall that Wasilla is a city approximately 40 miles from Anchorage, made famous in the 2008 U.S. presidential elections. Although Wasilla has a population of fewer than 7000, it boasts its own WalMart, Sears, Target, home Depot, and Lowes. At 5:30 AM on Black Friday, it was unseasonably warm (34° F.) and raining. But even then, the WalMart parking lot was jammed – people were definitely in a shopping mood. Across the street, Sears’ parking lot was also nearly full. The retailer had advertised several one-day specials – for example, a mechanic’s toolset regularly priced at $259 was on sale for $159, but the retailer was offering the set for a Black Friday price of $109. Although the doorbuster items were moving so fast that there weren’t enough shopping carts for consumers to carry their purchases out with, parts of the store were quiet, even though the retailer had placed in-aisle traffic builders like DVDs and video games throughout the store to generate some excitement. Three miles down the road from Sears and Walmart, Target also offered Black Friday doorbusters, but one shopper was overheard complaining to her husband, “I’m going back to WalMart – Target has nothing compared to them.” “The deal” clearly trumped convenience.
It remains to be seen whether consumers will continue to focus their attention on purchases that will maximize the spending power of their holiday budgets. It’s a traditional maxim in retail that the larger the basket size, the greater the gross profit percent of the total purchase – the assumption being that after shoppers have found the specials they were seeking, they will inevitably pad the transaction with profit-building items. However, there was little of that in evidence in Roseville. Retailers are notoriously top line oriented, but those with a sense of the P&L impact of small changes in gross margin understand that relatively small reductions in retail prices can dramatically affect the bottom line, if there aren’t compensating changes in either cost-of-goods or SG&A to deliver a reasonable number to the operating income line (and then, the business has to pay down its debt and pay taxes). Even if’s RSR’s oft-stated concerns about retailers having under-bought for 4th QTR turn out to be unwarranted, it remains to be seen if retailers have sacrificed a profitable quarter in order to have a good Thanksgiving weekend. One thing is clear – there is plenty of pent-up consumer demand for products and services, and therefore the notion that we might be moving into a new age of austerity may be just a tad overstated.
TECHNOLOGY NOTE: Somewhat surprisingly, there was little evidence of any special technology in place to alleviate long checkout lines during our Roseville, CA mystery shop. Almost no retailers had “line busting” wireless POS deployed, and only a few retailers (Macy’s and JCP) had price checkers available for consumers. Instead, retailers appeared to be offering customer service “the old fashioned way” – with people.
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