JEFFREY BROWN: Retailers hoped to capitalize today on what’s expected to be a more profitable holiday shopping season than last year’s. But the big holiday push comes amid continuing jitters over the direction of the economy.
As much a Thanksgiving tradition as travel and leftovers, the day-after shopping blitz called Black Friday, based on retailers’ hopes their yearly balance sheets will go into the black, pushed shoppers across the nation out the door this morning.
WOMAN: We are going to leave here, and then Kohl’s opens at 3:00. A couple of other stores open at 5:00, and then the mall opens at, like, 7:00, and then just go all day.
JEFFREY BROWN: Lines wrapped around stores, as die-hard bargain-hunters camped out for early-morning deals, especially on toys and consumer electronics.
MAN: I do run track and field, so I know where the TVs are, and I know how — how many steps it takes to get there.
JEFF KATZ, general manager, Best Buy, Springfield, Virginia: We opened at 5:00 a.m. My first people lined up at — Wednesday night at 10:00 p.m. So, they were in line all day Thursday, and through — into Friday morning.
JEFFREY BROWN: Despite an unemployment rate that remains stuck at 9.6 percent, analysts anticipated one of the most heavily trafficked Fridays after Thanksgiving in years. The National Retail Federation forecast that up to 138 million people could hit stores this weekend, and predicted a 2 percent increase in sales over last year.
Hoping to offset 2009′s disappointing numbers, retailers are trying everything to get customers’ dollars, offering a rash of sales and door-buster specials. Some stores went further and started on Thanksgiving Day itself. That included Sears, which opened its doors on the holiday for the first time in its 123-year history.
Shoppers’ willingness to line up and spend is a closely watched benchmark for the economy as a whole.
TERRY J. LUNDGREN, CEO, Macy’s: Retail and restaurants represent one in five jobs in America. So, if we do well, if we grow, then we’re going to be the ones that are going to start to lead us out of — into a recovery.
JEFFREY BROWN: According to new data, consumer confidence rates ticked up in October. Spending may be picking up, but not yet to pre-recession levels. Many of the customers we met today reflected that.
CHRIS BRAMAN, Black Friday shopper: It’s made us more aware of what — you know, what we’re buying. You can’t just go out and buying anything frivolously. You have to actually plan on buying larger purchases.
TARA LITTLEFORD, Black Friday shopper: You can’t do as much, and so that’s why Black Friday is so important. The prices are just great.
DANIELLE RANDALL, Black Friday shopper: I think I am shopping a little smarter. Other years, I would just shop until I drop, but now it’s a little bit smarter.
CHRISTINE TANKERSLEY, Black Friday shopper: Thankfully, we’re in a pretty good position right now. It — we’re in pretty much the same place we have been the last couple of years. So, my budget hasn’t changed very much, but I do need to stick to the budget.
JEFFREY BROWN: For online retailers, Thanksgiving proved to be a banner day, with sales up 33 percent over the same day last year.
Even more consumers are expected to join the virtual rush next week on Cyber Monday deals.
ADRIENNE PEDERSON, Black Friday shopper: Most of the shopping I do is going to be online, I think, this year. And I think, probably in the next week or so, I will pick up my shopping pace and purchase some more things.
JEFFREY BROWN: But today’s start to the shopping season did little to help the markets that were also focused on the global economy. The Dow Jones industrial average dropped 95 points to end the day at 11092, and the Nasdaq slipped more than eight points to close at 2534. For the week, the Dow lost 1 percent, but the Nasdaq gained more than half-a-percent.
And for more on the spending season and the larger economy, I talked a short time ago to Daniel Gross, economics editor and columnist at Yahoo! Finance.
Daniel Gross, welcome to you. So, the predictions this year have been fairly positive. Well, what’s the record tell us about such predictions?
DANIEL GROSS, economics editor, Yahoo! Finance: Well, in the last few years, at a time when the economy is changing gears, these predictions have actually been quite poor.
In ’08, they projected, you know, things would be OK, and there was a — quite a sharp drop in sales. Last year, they predicted that, you know, there would just be maybe more of a shrinkage, and there was actually some growth.
So, just as with market forecasts and with overall forecasts of GDP growth, the forecasters tend to get behind the curve on these numbers.
JEFFREY BROWN: Now, we all talk and — I guess I will use the word — hype Black Friday every year, year after year. How much of it does it really matter to the retail season and to the larger economy?
DANIEL GROSS: You know, I think matters more to the media than it does to the retailers overall.
I think what we want to keep our eyes on is really the trends. How are sales in September and October and November, you know, in the months and weeks leading up to that? That tends to focus and point the way towards how things will go in December. If you have had a bad few months in the economy and in retail sales in the fall, you’re not going to get a good Christmas season, regardless of what happens on Black Friday.
And if things are looking up in September, October, November, again, regardless of what happens on Black Friday, you’re probably going to get a good overall Christmas shopping season.
JEFFREY BROWN: And what retail sectors are you looking to as the key to tell you about these trends over the coming months for the economy?
DANIEL GROSS: Sure. Well, you know, one of the big trends is that the — the rich continue to do very well in this economy. They pulled back their spending in ’08 and ’09, so you saw stores like Saks or Neiman Marcus having big reductions in holiday sales. And all indications are that the high end is back.
You know, Wall Street is paying bonuses again. The markets are buoyant, so people think their — their wealth has grown. So, I would expect to see, you know, good results from the Tiffany’s of the world and Nordstrom. And those that cater to the middle, I would say that they will, you know, do better than they did last year, but they will not be reporting fantastic results, as they did in ’05 and ’06, when everybody felt richer due to the housing market and the stock market.
JEFFREY BROWN: Now, you — I think you referred in your last column to this as the top-heavy economy. You still — you still see that happening out there?
DANIEL GROSS: Very much so, with — but with the caveat that, you know, the people in the middle are doing, I think, marginally better than they were a year ago. There are a million more people who have payroll jobs in November 2010 than did in November 2009.
And some other signs of financial distress, you know, credit card delinquencies, there are just signs that, outside of housing, that financial stress, while still at a very high level by historical measures, is lower than it was last year and has been coming down over the course of this year.
And that tends to support a higher level of consumer spending.
JEFFREY BROWN: Now, parse the numbers online for us. That is something we have all, of course, been looking at year over year here, as it goes up. Where are we now?
DANIEL GROSS: Well, this is another reason that I think it’s possible to make too much of Black Friday.
With every passing year, more — more of the retail activity takes place online, whether it’s on Cyber Monday, as they call go it, or generally throughout the year.
You know, e-commerce today is about 8 percent of total retail sales. But that — that figure is growing. So, regular overall retail sales may grow 3 percent a year, but online sales are growing 10 and 11 percent a year. So, with each passing year, basically, what you see in the stores on Black Friday, while still the overwhelming amount of activity, it’s kind of less and less as a percentage.
So, a lot of growth, a lot of the real activity now will be taking place online.
JEFFREY BROWN: And, again, when you — when you look big picture, I mean, we always talk about consumer spending as being the most important driver to the U.S. economy. There has been some talk in recent times about whether that is still true, or whether it might be less true in coming years.
Where do you see that? How important is it?
DANIEL GROSS: Well, the rule of thumb that economists say is that consumer activity is 70 percent of the U.S. economy, which is a very high level.
And that is one of the reasons that we had such a sharp drop in overall economic growth in late ’08 and early ’09, because the consumers just stopped spending. You know, the economy is changing shape. We are, at the margins, getting a little more from things like energy, from agriculture, a little bit more from manufacturing, from exports than we were a couple years ago, and a little bit less from consumer spending.
But it’s not a dramatic change. In other words, maybe instead of 70 percent, it’s only 69 percent or 68 percent. It would take a — many years of this type of activity, of consumers kind of holding back and of other sectors rising to the fore, to get a real substantial change in the shape of our economy.
JEFFREY BROWN: All right, Daniel Gross, thanks for — thanks for joining us. Enjoy the rest of the holiday.
DANIEL GROSS: Thank you.