Historically, Black Friday was considered as exciting for retailers as it was for the consumers snapping up deals, but the rise of online competition has changed that. Today, the increased prevalence and ease of online shopping has led Brick and Mortar retailers to not only compete against each other for the steepest price cuts and earliest opening times on the day after Thanksgiving, but also the internet. Offering prices comparable to the dot com retailers is myopic. The built-in costs of having a physical retail location; rent, a full-time staff, a house keeping crew, décor and many other elements, make competitive pricing near impossible. Still, many retailers are trying. Their attempts are what Ron Johnson formerly of Apple (AAPL) and now charged with reshaping JC Penny (JCP) called, “a race to the bottom.”
No matter how early stores open on Black Friday or how they attempt to undercut their competitor price-wise, major online retailers that compete with the likes of Best Buy (BBY) and Wal-Mart (WMT) will have them beat. Already on the website for Amazon (AMZN) it reads: ” Black Friday deals are here! You shouldn’t have to stand in a long line to get a great deal. We’re searching for the best Black Friday deals everywhere–including Black Friday deals other stores are planning–so we can meet or beat their prices and bring them to you even earlier. These limited-supply deals will go quickly, but we’ll add new ones throughout the day, every day, so you can skip the long lines and still save a bundle. Plus, subscribe to our deals e-mail to get daily updates. “
Sales featured on the site have DVDs and magazine subscriptions at as much as 92 percent off, electronics at 3o and 40 percent below retail. Tools are 50 and 60 percent off as well, prices that will be hard to beat for Brick and Mortar locations. Simultaneously, group couponing sites like Living Social and Groupon (GRPN) also have a variety of Black Friday deals, with the former offering discounted prices from companies ranging from Verizon (VZ) to Electronic Arts Inc. (ERTS) and Sketchers USA Inc. These online deals, which in many cases, last for multiples days, overlap with many of the product offerings at stores from Target to Wal-Mart, that are working hardest to be competitive on the Black Friday front.
So is there a way that they can compete with online deals? Johnson, in an interview with the Harvard Business Review, claims there is. He says that retail isn’t broken, but the stores themselves are. Amid desperate attempts to compete, they’re forgetting the advantage of in-person shopping and inadvertently bolstering the appeal of their online competitors. Decisions to open up at 12am, rather than the traditional 6am, make shopping on Black Friday a nightmare for those that don’t enjoy wildly sifting through a pile of unfolded shirts for the right size while fighting against the tryptohane-induced exhaustion . The price declines will weaken margins while the earlier openings will worsen the experience.
Johnson points to his time crafting the retail concept of the Apple store as support for why the extreme deals and desperate behavior is counterintuitive. Apple is among, if not the most successful, retailers in the country. Their $40 million per store annual sales are largely driven, according to Johnson, by a desire for consumers to test drive items and receive one-on-one customer service. Certainly, such benefits to shopping in-store are reduced when conditions become cut-throat instead of comfortable. The retailers should play to their strengths on Black Friday, instead of attempting to engage in pricing competition with the likes of Amazon or Overstock.com (OSTK). Both those companies have been offering red line deals for weeks at prices that are in large-part more appealing than their Brick and Mortar counterparts. Attempts to mimic these qualities are unsustainable and concentrating on the in-store experience could help draw shoppers back from cyber space.
The end of the retail store at the hands of the internet has been predicted since the turn of the century, but with 90 percent of purchases still occurring in store, it may be time to recognize the value of buying things in store. Retailers may want to recognize their worth and appeal and rethink their overzealous attempts to be competitive with one another and the internet on the national shopping holiday. An article in the New York Times featured a comment from Nordstrom’s (JWN) spokesperson Colin Johnson, who when asked whether the company was concerned about shoppers checking rival websites and stores for deals since the addition of free wireless said, “We’re not afraid to compete.” Johnson added that, “the shopping landscape is changing very rapidly, and so we want to evolve with our customers.” The evolution he’s referring to, however, seems to be reaching terminal velocity; with an emphasis on terminal.
If the experience is eliminated for the sake of competitiveness and such luxuries as available fitting rooms or helpful sales personnel are erased, then internet companies will successfully claim profitability on Black Friday. They have already threatened Black Friday with the introduction of Cyber Monday, an online focused day that offers sales on the Monday after Thanksgiving, but they have the capacity to nip at day-of bottom lines as well. The introduction of short-term mobile flash sales, especially advertised in advance, could discourage consumers from engaging in the midnight hoopla at Best Buy, Wal-Mart and the many other brick and mortar retailer that have sacrificed several of the advantages of the in-store shopping experience in their arguably misconstrued attempts to be competitive.