Desperate Retailers Cut Into Their Own Margins

The New York Times this morning reported on the weekend’s sales results from every possible statistical angle. It was a tale of two economies, the overall economy holding and the retail economy holding on for dear life.

A quick highlight of the weekend stats:

• Shoppers spent 7 percent more this year than last
• Sales increased 3 percent compared with last year
• Foot traffic was up almost 2 percent (although a separate report said that foot traffic was down 11 percent)

Despite these seemingly encouraging statistics, many retailers did not report their weekend sales as usual and will instead roll them in with the monthly reports. J.C. Penny went so far as to say that, “in light of the challenging and volatile economic climate, and shifts in this year’s retail calendar, we don’t believe that reporting sales data for any one day (or weekend), including Black Friday, would provide a meaningful barometer of our business.” Interesting.

Unfortunately, Black Friday may not have changed the color of retail financials because the discounts, savings and sales cut so deep that the moderate increases reported haven’t changed anything.  You heard it here first. We warned just a couple of weeks ago that retailers should be careful of using lower prices rather than innovative marketing to lure shoppers (BusinessWeek Reports the Beginning of Holiday Price Wars). Now that they’ve done it for Black Friday, shoppers expect even greater price decreases leading up to the holiday and plan on holding their collective breath until they get it. This marketing tactic in this climate may be the ultimate bridge to nowhere.