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VOL. 6 | NO. 49 | Saturday, November 30, 2013

Shopping Spree

Retailers hope Black Friday crowds outperform lukewarm forecast

By Michael Waddell

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Retailers have been gearing up for a frenzied Black Friday, marking the beginning of the holiday shopping season, but industry experts expect a lukewarm year compared to moderate growth in 2012.

Shoppers look to take advantage of Black Friday specials at a Super Target in Dallas last year. Analysts expect a slow shopping season this holiday season.

(AP Photo/Dallas Morning News, Stan Olszewski)

Both nationally and locally, many stores opened earlier than ever before in an attempt to capture customers before their competitors and maximize a shorter-than-usual shopping season.

Wolfchase Galleria and Oak Court Mall, both owned by Simon Property Group, will have extended holiday hours this year. Wolfchase opened at 8 p.m. on Thursday, Nov. 28, and Oak Court Mall opened at midnight on Friday, Nov. 29. The two enclosed malls encompass more than 185 combined retailers.

“In response to customer demand, Wolfchase Galleria will be opening at 8 p.m. on Thursday, Nov. 28, for 25 hours of Black Friday savings, allowing shoppers to come early and stay late,” said A.J. Coffee, Wolfchase general manager. “We are committed to meeting the needs of our shoppers with different preferences and schedules, providing them with better access to all of the great holiday deals at Wolfchase Galleria.”

As a potential good sign for the holiday season, retail sales rose in October, according to the National Retail Federation. October retail sales, excluding automobiles, gas stations and restaurants, increased 2.5 percent seasonally adjusted over September, and 4.2 percent unadjusted from 2012.

Despite those positive numbers, the industry was bracing for a potentially less frantic Black Friday this year.

“Black Friday is less important than it used to be because it is now spreading out over the holiday shopping season,” said Dr. John Gnuschke, director of the Sparks Bureau of Business and Economic Research and co-director of Center for Real Estate Research at the University of Memphis. “The ability of merchants to have pricing power is being reduced by the heavy competition from other retailers and by online retailers.”

Gnuschke expects retail sales growth will be low to moderate this year, much like last year. Last year registered a 4.1 percent sales increase during the holiday shopping season, considered moderately healthy, but early projections this year forecast a lower percentage.

“The economic conditions and the lack of income growth, along with consumer fears and lack of confidence, will keep spending growth at a low to moderate level of 2 percent to 4 percent,” Gnuschke said. “We need a strong economic recovery and strong growth before we will get higher levels of sales growth.”

Danny Buring, partner with The Shopping Center Group LLC, agrees.

Holiday shoppers fill the halls of Wolfchase Galleria during last year’s  Christmas shopping. 

(Memphis News File/Lance Murphey)

“Consumer confidence is flat, which will keep spending for this year’s holiday down, but with household earnings up we still expect a national increase somewhere in the mid-3 percent range over last year,” he said.

Buring said he believes the holiday shopping surge during the past 10-year span has been fairly flat because the economy was so strong up until 2008 and then fell off.

“If you look at the last few years, I think we are seeing positive nominal increases on a year-to-year basis,” he said. “A few years ago, Black Friday and the holiday season was the determining factor in whether or not certain retailers were going to be around for the next year.”

For many other retailers, Black Friday and the weeks following determine whether they will end the year in the red or black.

“Black Friday is the beginning of the make-or-break holiday season for retailers,” Buring said. “Historically, up to 40 percent of their revenue is made in this short window. The shopping season will be several days shorter this year, and I think that is scaring retailers. This year, for the first time Black Friday is really starting on Thanksgiving Day, with many retailers open on what was historically a non-shopping day.”

Most of the national chains are opening earlier this year, in many cases on Thanksgiving Day.

“Promotions are happening across the board and center around social media, where consumers are influenced by the experiences and reactions of their friends to products of interest,” Buring said.

Wolfchase is even offering shoppers a chance to win a $10,000 shopping spree on behalf of Simon Malls through a Facebook promotion.

According to Buring, some retailers are doing away with any additional expense associated with layaway sales, and some that have never offered to sell merchandise on a “rent-to-own program” are starting to do so.

The most popular items are anticipated to stay the same as in years prior.

“Electronics and toys will continue to be the sales leaders,” Buring said.

Stores like Target, Walmart and Best Buy have experienced large crowds lining up outside their buildings hours before opening time over the past few Black Fridays thanks to exclusive “door buster” deals to lure in shoppers. Best Buy, which opened its stores at midnight the past few years, opened earlier this year.

“We are opening at 6 p.m. on Thursday this year,” said Charlie Peterson, general manager at Best Buy’s Wolfchase area location. “We will have door buster items beginning at 6 p.m. and midnight on Thursday and at 10 a.m. on Friday morning.”

Peterson expects to see strong sales from the recently released PS4 and Xbox One video gaming systems, as well as from new handheld tablets from various manufacturers.

Silinda Page, right, of Arlington does some holiday shopping last year with her children at Target.

(Memphis News File/Lance Murphey)

In a move to get a step ahead, the retailer had special online sales earlier in the week (Monday and Tuesday) to entice shoppers to grab hot deals early and avoid the crowds on Black Friday.

Best Buy has four locations in the area, including the Wolfchase location, two stores in East Memphis and one in Southaven.

Germantown resident Lawrence Norton said he planned to test the Black Friday waters for the first time this year.

“I’ve got my eye on a 50-inch flat screen television for $299,” he said. “I just want to get out there this year and see what all the fuss is about.”

The National Retail Federation forecasts the average holiday shopper will spend roughly $738 on gifts, décor, and greeting cards this year, 2 percent less than last year.

Over the past couple of years, more and more people are doing their shopping from the comfort of their own homes versus shopping in brick-and-mortar locations.

“The growth of online sales has a negative impact on traditional retailers and, to some extent, on sales tax revenues for state and local government,” Gnuschke said. “Online transactions are on a positive growth path and will continue to grow in the future. Next-day delivery services make this a viable alternative to traditional shopping.”

Only 13 percent of the population plans visits to physical stores, down from 17 percent last year, according to Nielsen’s annual Holiday Spending Forecast. Interest in holiday shopping has dropped each of the last four years, from 20 percent of those participating in 2010.

“Online shopping is growing at a rate significantly higher than brick-and-mortar retail shopping,” Buring said. “At the same time, e-commerce often has a positive effect on brick-and-mortar in that it increases interest in shopping in general. Retailers are focusing a significant amount of their energy and investment into online shopping and fast and reliable platforms of delivery. In many cases, a retailer’s growth strategies are directed toward their distribution and freight fulfillment centers rather than new stores.”

Nearly half of shoppers, 46 percent, plan to shop online, up from only 30 percent in 2012.

Morgan Stanley predicts this year’s holiday shopping season could be the worst since 2008.

“We believe an uncertain U.S. macroeconomic backdrop, unfavorable calendar shifts, continued big ticket item strength (autos, appliances, home improvement) and increased promotional activity likely inhibits 2013 holiday sales as well as overall near-term retail sales growth,” writes the Morgan Stanley team.

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 110 154 13,810
MORTGAGES 135 193 18,019
FORECLOSURE NOTICES 1 29 3,534
BUILDING PERMITS 430 430 32,733
BANKRUPTCIES 52 130 13,133
BUSINESS LICENSES 20 45 4,750
UTILITY CONNECTIONS 83 204 20,104
MARRIAGE LICENSES 0 33 4,230

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