Strung-Out Consumers, Desperate Retailers, Crummy Sales

Wolf Richter www.testosteronepit.com www.amazon.com/author/wolfrichter

During this festive time of the year, the whole world is intensely focused on American consumers, watching their every move under a digital microscope to parse if the universe is going to live or die. Retailers and the media joined forces to create hoopla and excitement and frenzy and the perception of once-in-a-lifetime deals. Stores opened on Thanksgiving, stayed open late at night, and opened early in the morning. And consumers dove right into this extravaganza.

Chaos, mayhem, melees, and stampedes ensued. Black Friday Death Count arrived at, I don’t know how, 7 deaths and 90 injuries from shootings – over parking space, obviously – stabbings, tramplings, collapses, fights, pepper sprayings, exhausted shoppers falling asleep at the wheel…. “Because only in America people trample each other for sales exactly one day after being thankful for what they already have,” is how a tweet explained that phenomenon.

The sacrifices of shoppers who paid the ultimate price, or almost did, will not be wasted. They did their patriotic duty and obeyed orders and went out there and, despite immense difficulties and bad weather, fought it out in the trenches, often mano-a-mano with other shoppers, to further our national goal of borrowing money to buy more baubles, devices, and rags made in distant countries and then re-exporting the detritus for recycling. The world economy is based on this. American consumers merely execute the plan.

This year, the shopping season from Thanksgiving to Christmas Eve is very short, 27 selling days, as opposed to 33 last year. Consumers will have to focus. They will have to buy more, as every year, but do so in 18% fewer days. It will be a short and intense shopping binge. They must not take prisoners. They must shop till they drop, and when they drop, others must trample over them without slowing down. And Thanksgiving weekend should have been the glorious beginning of this wondrously spiritual holiday season.

What the world got instead was a fiasco. The sacrifices of those patriotic shoppers who paid the ultimate or nearly ultimate price to crank up the Chinese economy were, according to preliminary data, wasted.

On Saturday, research firm ShopperTrak, which uses video surveillance in 60,000 retail stores, estimated that foot traffic on Thursday and Friday rose 2.8% from last year, to 1.07 billion store visits. It extrapolated that retail sales increased 2.3% to $12.3 billion. But Thanksgiving shopping is new, with many big retailers open for the first time. So Thursday’s excitement was followed by a Black Friday debacle, when foot traffic plunged 11.4% and sales 13.2%.

Giddy media outlets spun this as good news – until the National Retail Federation poured ice-cold water on it. Its crummy results were not based on cash that someone counted but on surveys of 4,464 consumers, conducted on November 29 and 30, with a margin of error of plus or minus 1.5%. This early in the game, there are no real numbers.

It estimated that, in terms of foot traffic, over 141 million “unique shoppers” hit the malls by the end of the weekend, up from 139 million last year. More people were coming out, but…. On average, each shopper spent only $407.02, down 3.9% from last year. Total spending fell 2.9% to $57.4 billion.

Despite Thanksgiving having been turned into a shopping day! Retailers are now discovering: it’s a zero-sum game, where the frontloading to Thursday cut sales for the rest of the weekend. Expenses were the only thing that went up. If inflation is added into the equation, the total decline for the weekend amounted to a gut-wrenching 4%!

It was the first drop in at least seven years! Even the catastrophic Thanksgiving weekend of 2009 was roughly flat. Instead of spending more money in less time, as they were supposed to, consumers are spending less money in more time. A toxic mix; many retailers get 40% of their annual revenues from the holiday shopping season.

Doorbuster bargains are biting back as strung-out consumers resort to “mission shopping.” They hone in on that TV like a heat-seeking missile, grab it, fight off challengers, manually if necessary, forgo impulse purchases that would allow the store to make some money, and leave.

“They had an absolute plan,” Thom Blischok, Chief Retail Strategist with Booz & Company’s retail practice, told Bloomberg. Every single one of the 300 or so shoppers he spoke with on Thanksgiving and Friday had a list. “I found virtually no browsing,” he said. That’s how I’d do it if I were crazy enough to go shopping on those days.

Nevertheless, the NRF stuck to its forecast for total sales in November and December to increase 3.9%. How could that be imaginable? “December will be a hugely promotional month to get those remaining shopping dollars out there,” said Pam Goodfellow, a director at Prosper Insights & Analytics, which conducted the survey for the NRF. “Retailers will be very aggressive.”

Online sales leave some room for (possibly false) hope. Over the weekend, they accounted for 44% of total sales, up from 41% in 2012, according to the NRF survey. Adobe Systems, which analyzed 400 million visits at over 2,000 websites, figured that online sales jumped18% to $1.062 billion on Thanksgiving, and 39% to $1.93 billion on Black Friday. comScorereckoned that online sales rose 3.1% to $20.6 billion in November, over a quarter of which likely went to a single mastodon, Amazon, ahead of EBay and Walmart.com, with Thanksgiving sales up 21% to $766 million and Black Friday sales up 15% to $1.2 billion. The huge discrepancies? They’re all just guessing.

It will be tough for the miracles of e-commerce to overcome the brick-and-mortar debacle. Consumer confidence has been plunging in recent months. No wonder: Booz & Co. foundthat 65% of Americans were living from paycheck to paycheck, up from 61% last year, as wages at the lower end of the scale have not kept up with inflation – and for many workers have actually declined. Those are the lucky ones. Because there are still 1.5 million fewer jobs than there were in 2008.

But the Fed has taken good care of the economy. Its ceaseless QE and ZIRP have lost savers about $300 billion in annual income and have inflated stock prices by $14 trillion in five years. Corporate cost cutting and financial engineering have replaced revenue growth as driver for upticks in earnings per share, though that too seems to have run out of steam. Neither the Thanksgiving doorbuster hoopla nor the chaos it caused can hide the inconvenient fact that American consumers live in the real economy, a rather drab place, not the glittery one that the Fed inflated into gorgeous bubbles.

The first thing I noticed after I’d removed the glossy brochure from the envelope was the crisp $5 bill. I’m a sucker for free money. After peeling it off the letter, I started reading. It was from Google and involved a lot more money – in return for just about all my private data. Read…. How Much Is My Private Data Worth? (Google Just Offered Me $$)