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Is Holiday Shopping A Canary In The Coal Mine For Retailers?

What do you do when the bird stops singing?

As seen on Forbes

Well into the 20th century, miners used canaries as a way to detect methane and carbon monoxide in mines. As long as a canary was singing, all was well. If a canary died, it was time to abandon the mine immediately. It meant the oxygen was running out.

For many retailers, the canary is no longer singing. The signs are all around us. For the last 24 years, our corporate office has been in Elmhurst, Illinois, an idyllic town roughly 18 miles west of Chicago. Because of its great schools, health care and neighborhoods, it has been named the No. 1 community in which to raise a family by Chicago magazine. It also lies at the intersection of three major expressways and a commuter rail line, so businesses love it too—unless, that is, you happen to be a retailer.

Sadly, in the past year, Elmhurst has lost Al’s Hobby Shop and Leonard’s Clothiers. Combined, these once proud destination stores had been in business for more than 132 years. Each had survived 10 recessions while building a long list of very loyal customers. These customers were literally shocked at the closing of each of these establishments and their inability to survive what everyone in town has assumed are the negative effects of online shopping.

But a quick check of Black Friday sales numbers reveals it may be more than the Internet that is hurting retailers like Al’s and Leonard’s nationwide.

According to the National Retail Federation, this year, Black Friday weekend sales (Thursday through Sunday) were down 11 percent over last year. The number of unique shoppers was also down 5 percent from last year. So despite much better weather and more and more stores being open on Thanksgiving, consumers shopped less and spent less.

Online sales continued to grow but not at the rate they had been.

holiday shopping

So what went wrong? Industry experts will argue that consumers were in a better financial position this year versus last. That should have helped traffic and spending. Others will say that more disposable income allowed them to not have to go after the steeply discounted items on Black Friday weekend.

To get a better understanding, I spoke with Maddock Douglas’ own Steve Wallin. Before he joined our team, Wallin was co-founder of Frontline Insights, a retail consulting firm that he founded after many years at Best Buy as VP of Consumer Insights and leading the launch of Geek Squad Tech support.

Here are my four big takeaways after that conversation.

  1. Black Friday is nearly dead. Retailers’ efforts to extend Black Friday to gain more sales and to get a step ahead of the competition has essentially killed Black Friday as we know it. It is now Black Thursday, Black Friday, Black Friday Weekend and Cyber Monday. Soon it will be Black November/December. By the way, the decision to extend Black Friday was never truly consumer centered. In my opinion, it was fear based (i.e., “I’m afraid the competition is going to do it, so I’ll beat them to the punch”).
  2. The urgency once created by Black Friday is fading. This point logically follows the last. While Black Friday used to be an “event” in which consumers truly believed they were getting the best price, it is now a “season” in which consumers feel less compelled to fight crowds to get deals. Those deals can be had anywhere and nearly at any time without near the hassle. This just in: Joseph A. Banks is having a sale, and every major phone carrier is giving away phones. Shocker!
  3. Retailers have made the game about price—and what is missing is the value of the experience. When multitudes of retailers are claiming their main benefit to consumers is price, that isn’t very differentiating. It is easy to copy and adjust nearly real time. It accelerates a downward spiral. And while many consumers are very price oriented, part of that is because if you can’t show consumers any other value proposition, other than price, what are they left with? Promotions aren’t resonating, so retailers simply yell louder and more often. Consumers aren’t responding. Creating value for consumers is the path to differentiation and better profitability. Starbucks didn’t grow based on lower price; they grew based on consumer experience that commanded a higher price. Best Buy built Geek Squad in part because they heard that their greatest value was in improving the experience of installing electronics—which kept people from buying electronics. Creating a valuable experience is far better (and more profitable) than competing on price.
  4. Retailers must create certainty for shoppers. As more consumers choose the convenience of shopping online, retailers must figure out not only how to create value in store, they must also do it online AND make the experience of the two entities as seamless as possible. But to me, that is just the starting point. The opportunity is to help inform consumers and drive certainty in their shopping journey. Every consumer wants to make the best choice. No one wants to be “that guy/gal” who others snicker at because he/she paid too much or bought the outdated model, etc. With the ease of shopping at multiple locations within minutes via the Web, consumers have more choices than they know what to do with, which means retail has a need to fill—leverage their assets to still provide choice but build certainty for consumers.

For example, when you bring your used car to CarMax, they will tell you what they will pay you for it on the spot, let you check a huge inventory “online” in store with a consultant who will help you with the experience, and then let you choose from hundreds of cars which ones you want to test drive. They have magically combined the best of online and in-store experience to reinvent (gasp!) used car shopping. They understood that confusion and hesitancy (and plaid sport coats) are the nemesis of closing sales and helped eliminate them for consumers to create a competitive advantage in an industry that most thought was beyond saving.

My Takeaway

Basically, Black Friday is dead, or at least severely wounded. The industry that created it killed it. Urgency is gone. Price is king. Value is missing…and this is a sign of things to come for retail in general.

Consumers are fickle; they have no reason to be otherwise. To save brick and mortar, retailers must innovate to find unique ways to provide a valuable experience that fits within their business model. That’s the only way to create differentiation and stand out in an industry that is increasingly uniform in their approach to Black Friday specifically, and dealing with consumers in general.

By the way, Joseph A. Banks is having another sale.

Follow me on Twitter @theideamonkey or read my Forbes blog here.

 

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