In the weeks leading up to the biggest shopping days of the year, consumers were bombarded with negative news in the financial markets. Frightened retailers braced for the worse, but the worst didn’t happen as the Black Friday weekend ended with some pleasant surprises. The day after Thanksgiving is called “Black Friday” because it is traditionally the day when many U.S. retailers hit their breakeven point for the year and turn profitable. After all the doom and gloom leading up to the weekend after Thanksgiving, retailers finally saw shoppers coming into their stores in sizable numbers and making meaningful purchases.
According to the National Retail Federation (NRF) and BIGresearch, more shoppers spent money in brick-and-mortar retailers this past weekend, but they spent less in total than last year. Their research showed nearly 172 million people (approximately 56 percent of the U.S. population) spent an average of $347 during the shopping weekend. While the numbers of shoppers were up 4.7 percent, their expenditures were 3.5 percent lower than last season. Collectively, shoppers spent an estimated $41 billion.
Trends of shoppers differed this year over previous years with small handheld electronics like GPS units and digital photo frames accounting for a bigger percentage of sales than flat panel TVs and other big-ticket items.
Retailers should not go dancing into the streets just yet though, as times are still tough and it is impossible to predict what will happen for the rest of the shopping season.
Small retailers should continue to watch their inventories closely, paying attention to keep it as lean as possible without missing sales. In an ideal world, small retailers will convert most of their inventory to cash by the end of the year and begin 2009 with minimal inventory to maintain sales levels consistent with the previous January and February. In nonessential goods retail, the two biggest sales months are followed by the two weakest months.
I have several small retailers as consulting clients, I am very relieved that the weekend’s sales were much stronger than expected. In one of my client’s cases, they had predicted sales 20 percent lower than the same period last year. When all sales for the week were calculated, their actual sales were nearly twice as much as we had forecast, which turned out to be about 10 percent over last year’s sales. My continued advice to them is to hoard cash, replenish inventory only as necessary, and continue to assume the rest of the season will be tough, followed by a very weak January and February.
If you are a small retailer that had a good week, take a sigh and continue to hunker down for a rough season. I hope we will all be pleasantly surprised by December 31.
Sam Thacker is a partner in Austin Texas based Business Finance Solutions.
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