Monday, November 29, 2010

Buying Patterns

By most accounts, holiday shopping got off to a rousing start over the Thanksgiving weekend. Black Friday and Cyber Monday today brought out pent-up consumer demand.

The question now is, will the momentum maintain itself, or will consumers revert to their recent years’ practice of “U-shaped” spending, high at the start and finish of the season and almost nonexistent during the middle four weeks, causing panic among retailers and even more discounts than originally planned?

If I were a betting man, my money would be on the U-shape scenario, especially since many of those interviewed for stories said they already completed their holiday shopping because of the great deals they found last weekend and even before the official start of the madcap buying season.

Two more cautionary notes. First, Hannukah starts Wednesday night, so in major metropolitan areas, spending by many Jewish families is virtually complete. Second, news stories pointed out that many shoppers over the weekend paid cash, avoiding credit cards. If the consumer stays true to her budget, that’s troubling news to an industry, nay, our nation, that relies on impulse purchases to pump up the economy and rake in profits.

Perhaps nothing can be better for retailers than strict adherence to planned promotions, investment in style-right assortments and tight control on inventory levels. Retailers cannot be expected to stop running sales cold-turkey. As long as they resist putting the whole store on sale, they can benefit from aggressive promotions. Too often those reporters who wonder if all the sales will eat into profits don’t realize that disciplined discounts generate profit. It’s when panic sets in that profits fly out the window.

Style-right assortments apply to hard goods as well as soft goods. It’s simple—if the right goods are bought by the merchandise buyer, they’ll go out the door under the arms of contented shoppers. But no amount of discounting will get rid of dogs. The ability to select the right goods is what separates great merchants from the mediocre, or worse, the bankrupt.

Too often in the past, retailers loaded the floor with too much inventory in initial orders and replenishments. Customers came to realize they could wait them out for bigger and bigger discounts. Last year retailers started fighting back, retraining shoppers that what they saw on the sales floor would not be augmented by new shipments. If they liked an item that was at full price, or at a modest 20% off, they needed to scoop it up right away or risk not getting it at all. Expect more of the same basic training this year.