Retailers Left Between A Rock And A Hard Place

Includes: BBY, KSS, M, TGT, WMT
by: The Operations Room

By Marty Lariviere

It’s early November and that can only mean one thing: It is time for me to post about Black Friday. (Doesn’t it seem that these posts are coming earlier and earlier every year?) The development this year is that Best Buy (NYSE:BBY) and several other stores are going to open at midnight, the continuation of a trend that started last year. Here is what the Wall Street Journal says (More Retailers Attack at ‘Black Midnight’, Nov 7):

Best Buy Co. is joining the list of big store chains opening at midnight after Thanksgiving this year in hopes of getting a jump on the competition, following recent announcements by Target Corp. (NYSE:TGT), Macy’s Inc. (NYSE:M) and Kohl’s Corp. (NYSE:KSS).

Best Buy Chief Executive Brian Dunn said he felt forced to “make a very difficult decision” and open at midnight because rival retailers were doing so, though the decision was controversial inside the company.

“I feel terrible,” said Mr. Dunn, who was once a store manager, speaking during a conference in San Francisco. “It will change some Thanksgiving plans for our employees. It certainly changes mine.”

In the following video, one of the article’s authors discusses the trend and waiting for Wal-Mart (NYSE:WMT) (the last major retailer to move on this) to announce what it will do.

So it seems that retailers are left between a rock and a hard place. They will never compete with the convenience of on-line retailing. Opening earlier and earlier is a poor substitute for being able to shop from home. But it is the best they can do. That leaves them in a race to the bottom (at least from the perspective of their employees) with regard to how much they can impose on the holiday.

The article makes the point that Best Buy joining the early crowd is important because it sells big-ticket items. That highlights an interesting part of the Black Friday phenomenon. As we go into the holidays, there is a set of shoppers who have fixed budget for gifts. That sets off a race to get a share of each shopper’s wallet. I don’t know of any models that directly address this but it would help explain door buster deals as well as a race to open early.

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