Shoppers have more money and, surprisingly, more reason to spend

The nightmare scenario for the nation’s retailers this year is hitting stores: whether or not they’ll have enough Black Friday deals to entice customers. More specifically, Black Friday has become a big time test…

Shoppers have more money and, surprisingly, more reason to spend

The nightmare scenario for the nation’s retailers this year is hitting stores: whether or not they’ll have enough Black Friday deals to entice customers.

More specifically, Black Friday has become a big time test for retailers to see how deep into the holiday season they can get without collapsing. Last year, brick-and-mortar retailers had to close hours before Christmas due to declining consumer demand and tight inventory.

Analysts say consumers have less money to spend this year, bringing more focus on spending earlier in the season instead of waiting until the day after Thanksgiving.

“Consumers are going to be in a very, very good position to make very good decisions about buying things,” said Neil Saunders, managing director of GlobalData Retail. “Many are going to value the dollars and spend them wisely.”

All signs point to a strong holiday shopping season. More people are shopping online for anything from Black Friday bargains to The National Retail Federation predicts consumer spending for the 2014-15 season will be at least 3.6 percent higher than the year before, totaling an all-time high of $616.6 billion.

But even with all those holiday gift cards racking up thousands of miles on retailers’ Porsches, the biggest opportunity for growth lies with in-store shoppers.

“So as more and more people opt to make purchases in store versus online, that has implications for the sale of discretionary items and presents as well,” said Joel Bines, managing director of AlixPartners’ retail practice.

As budgets tighten and people seek savings and reduced costs, retailers are increasingly focusing on reducing waste and fixing existing infrastructure. Items like freezers and walk-in freezers that, in the past, would have been discarded upon expiration, can now be repurposed to keep displays fresh. Supermarket operators are also increasingly on the hunt for ways to reduce waste, improve efficiency and, possibly, cut prices. It’s a game of Whack-a-Mole, said Bruce Rayfield, principal at consultancy Ferris Baker Watts: “you have to come up with ways to deal with the bureaucracy or complexity of procedures to get rid of stuff.”

The retail industry continues to grapple with evolving consumer habits, which has kept shoppers more loyal to retailers who offer certain products, said Jeffrey Sadove, executive chairman of Saks Fifth Avenue, speaking at the chain’s Q3 earnings call. It’s also becoming a point of engagement for companies.

“Retailers really have become partners in service,” Sadove said. “We really view ourselves as a service business.”

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