🎁 'Tis the season to support public service journalism Donate Now

Making an impression on Black Friday

Sam Eaton Nov 24, 2006

BOB MOON: So much for frustration-free shopping online today: Throughout much of the morning, Wal-Mart’s website was overwhelmed by high traffic. Talk about too much of a good thing: The world’s largest retailer blames a “higher than anticipated traffic surge” at Wal-Mart.com. The site appears to be back to normal now. But Web analysts say there’s no telling how many people went elsewhere when they couldn’t buy one of those cheap plasma TV’s or other items on sale for this Black Friday.

Online retailers and their brick-and-mortar counterparts were pulling out all the stops today, offering rock-bottom prices, free gift cards. And many stores unlocked their doors at midnight hoping to get a headstart on their competitors. Still, as Marketplace’s Sam Eaton explains, it’s not just sales that retailers were after today:

SAM EATON: Comp USA stores opened their doors even earlier, at 9 p.m. last night. The Culver City store near Los Angeles had a line of turkey-stuffed shoppers that stretched around the corner. Hamoud Abdumali was one of those braving the crowds. His motivation? Bargains.

HAMOUD ABDUMALI: Well, I need a video card for the next Windows operating system to make my computer compatible and here it is. I’m saving a hundred and ten bucks.

The ever-earlier store openings and flashy discounts are part of the high-stakes game of landing the first Black Friday shoppers. Scott Krugman with the National Retail Federation says there’s a method behind the madness.

SCOTT KRUGMAN: Retailers have conditioned consumers to expect the very best bargains over Black Friday and I think the retailers that disappoint will be left at a little bit of a disadvantage as far as starting off their holidays.

But that disadvantage has little to do with Black Friday profits. Some of the plasma TV sets and laptop computers people are snatching up today are priced so low that stores don’t even make money off of them. They’re called “loss leaders.” Krugman says since Black Friday is no longer the biggest shopping day of the year —that honor goes to the Saturday before Christmas — today is more about making an impression on shoppers than about making money.

KRUGMAN: That’s the one day that they’re making their list and checking it twice in the sense that they’re getting a feel for what merchandise is out there and what the price points are. And if you’re the retailer with the right merchandise and the right price points, chances are the consumer’s going to come back to you throughout the season.

Add it all up and retailers are expecting a 4.5 to 5 percent increase in holiday sales this year. That’s down from last year’s 6 percent boost. The reason? Economists are worried that a slowing housing market will take a toll on consumer spending. When housing prices were on a tear, consumers relied on home equity and mortgage refinancing to boost their purchasing power.

Krugman says the good news for retailers is that most Americans are likely to shrug off the housing bust. He says that’s because people look at holiday shopping as “necessity” spending.

In Los Angeles, I’m Sam Eaton for Marketplace.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.