An estimated 134-million shoppers are expected to take to the stores today as “Black Friday” kicks off the Christmas shopping season. Iowa State University economist, Meghan O’Brien, says while many shoppers will want to load up on Black Friday gifts, they likely won’t have the money to do so. O’Brien says retailers are aware of the situation.
O’Brien says one the trends they’re seeing is retailers are responding to the competition by not just trying to capitalize on Black Friday, but offering huge sales all the way up until the holiday. O’Brien expects shoppers to takes notice of the sales.
“I think what we’re going to see is a lot very price focused shopping by consumers, and I think we’ll see a lot of them trading down to less expensive stores like the large discounters. I think we’ll see people buying more practical gifts, and overall I think people are going to be very sensitive to price,” O’Brien says.
Consumers spent away during what O’Brien calls the expansive economy from 2003 to 2007, when money was more available. But she doesn’t expect that kind of spending this year. She says a lot of people were using equity in their homes to pay off their credit cards and using their credit cards to buy “big durable goods items” like big screen TV’s, computers and appliances. “So one kind of has to wonder at this point how many people who didn’t satisfy that demand when felt wealthier, are still out there,” according to O’Brien.
Today is called Black Friday because retailers hope big sales will get them out of red ink from the rest of the year. O’Brien says the reason is not based on holiday hype, but the fact that retailers have to carry a certain amount of inventory, even in down months. She says they have to borrow money to buy inventory through the year and then hope they can finish with strong sales at the end of the year to make back some of the money they borrowed.
O’Brien says with the current economy, the success of the holiday sales will have more impact than normal. O’Brien says there are a lot of middle of the road retailers that are getting squeezed out. She says the high end stores are still doing business with those that can afford them, but middle income hoppers will be trading down, “so I do think there’s going to be a lot of shake up during this holiday season.”
The National Retail Federation is projecting a one percent decline in holiday sales from last year. But O’Brien calls that projection “optimistic,” given the economic climate and consumer confidence levels. She reports it is more likely that holiday sales — excluding gasoline and automobiles — will experience a three to three-and-a-half percent decline from last year.