Black Friday came to be, because it was typically the day that most retailers moved from being “in the red” to being “in the black” or profitable.  Most retailers could see upwards of 50% of their annual sales between tomorrow and Christmas.  Which, of course, explains why stores may seem so empty the other 11 months of the year.  Funny thing, though, with all the discounting, it doesn’t look like many of the big box merchants are going to see their hoped for profits.  Take 75% off anything, as some clothing merchants are talking, and there’s very little margin left for profit.

At the same time, merchants are drasticaly reducing their workforce to reduce their labor costs.  This will likely mean, even with fewer shoppers, that lines will be long and service poor.  To me, those are the bitter truths that stick with me for the rest of the year and explain why companies like Mervyn’s and Circuit City are going out of business and filing for bankruptcy.  The tighter money gets, the more consumers want to get for their money and that includes service.  If they want lesser service they will go where they expect less – Wal-Mart, TJ Max, etc.

Where this separation between price and quality becomes much more well defined when you drop in convenience, which is why I question the viability of one trick pony companies like Toys R Us.  In economic times like this, it’s impossible to imagine that consumers would go to Toys R Us to buy their toys, as they might have in years past, instead of picking them up for less at Wal-Mart, where they are already buying clothing, household items, and necessities.  Wal-Mart already has a 23% marketshare in the toy business, and in a recessionary market like this I imagine that will pick up considerably as we get through the final few days before Christmas.

So where does that leave us?  My wife will be out there bright and early tomorrow trying to get some good deals, and she’ll be visiting bankrupt retailer Mervyn’s, even knowing that they’re not intending to have any really good Black Friday deals.  She will also be visiting the mall, Kohl’s, and Target.  From past experience, she’ll be coming home with plenty of stuff we need… and quite a bit we don’t, but nobody will accuse our family of not doing our part to prop up the economy this holiday season.

Happy Thanksgiving to everyone – may you day and Black Friday be everything you could hope for.

Ranter

After losing $320 million last fiscal year, and filing Chapter 11, Circuit City is closing 155+ stores in a last ditch effort to survive. Will it be enough? Doubtful.

It is very unfortunate that some companies have been unable to change and keep-up in today’s ever changing marketplace, and Circuit City is a prime example.  Once a leader in the consumer electronics market they have recently fallen well behind their closest competitor, Best Buy.  Today, citing concerns about their future, Circuit City files for Chapter 11 bankruptcy protection, which, in theory, would allow them to coninue operations through the peak holiday season.

What’s not written out in their filing are the changes that they’re going to make that might enable their future success.  The company does not appear ready to change, and without a much needed 180 degrees change from what they’re doing today it’s unlikely that they will last through the holiday season, let alone through 200.  So here’s the burn…

Circuit City would have you believe that they are going to come out of this bankruptcy protection in early 2009 – as though this holiday season alone will save them.  The reality is quite a bit more complex, because it’s already obvious everywhere you look that this holiday season is going to be quite dark.  The consumer is done spending the big dollars for a while and that’s going to seriously impact merchants like Circuit City.  What’s worse is that Circuit City doesn’t have the reputation that it used to, which means that just having a local store may not be enough any more.

That’s right – I said it – Circuit City has a very poor reputation and these days its quite deserved.  The quality of service that you get from Circuit City is far below even the worst retail merchants out there and even the managers seem apathetic to their customers and employees.  Why would any consumer choose that over what they can get from Costco, Best Buy or even Sears?  They wouldn’t and in recent years Circuit CIty has paid the price.

My belief – it’s only a matter of time, so avoid those extended warranties and be very careful what you hope for if you need long-term service on any product you buy.

Ranter

I went into a local Circuit City store today after watching the “store closing” everything must go sign they were hanging on the building.  Signs plastered everywhere said “10 – 30% Off Everything in the Store!”  Not great deal, but worth considering if the right items were at 30%.  So I went in – the store was packed compared to normal and seemed very dirty by today’s big-box retail standards.  Imagine my surprise to see that even with discounts their prices were quite a bit higher than most of their competition and yet people were still buying stuff at what I would consider a feverish pace.

For example, and I would never buy it, but they had a gazillion of them, all DVDs, including the Incredible Hulk were on sale for 20% off.  Not too bad a discount, but it was off the retail price of $24.99 bringing the price to about $20.00.  That same disc, through Amazon.com is in stock for $15.99 plus shipping charges for people spending less than $25, and you have to wait.  Target across the street – $16.99, no wait, regular price.  That’s a pretty big difference for a relatively insignificant product – other items were equally over-priced and in some cases the higher the price the greater the gouging.  And yet people were still buying.

I don’t understand it – probably never will – but it would seem that the thought of a store going out of business and passing on big savings is enough for consumers to set their fear of a faltering economy and getting screwed aside.  So many of these over-pricings seemed contrary to conventional wisdom, and some of the discounted prices were even greater than recently advertised prices (noted for one camera that I had recently considered), and because these stores are closing they cannot honor the advertised pricing offered by stores that will remain open.  Nice… that makes no sense at all.

Do I blame Circuit City – no – they have to make an effort to return shareholder value, but the consumer.  The consumer has no excuse for this stupidity.  Open your eyes.  Don’t run blindly to the big signs – whatever you “need” today will be there tomorrow.  Circuit City isn’t giving this stuff away – they can always truck it off to another one of their stores and continuing trying to gouge the average consumer.  They are still a business and consumers need to remain educated consumers.

Ranter