Retailers await shaky Black Friday as consumers are expected to cut back spending

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Retailers await shaky Black Friday as consumers are expected to cut back spending

Port Washington (NY) – It does not take much to predict that Black Friday sales are rather unlikely to set a new record and that retailers won’t have much fun this year. Two surveys shed more light won what we can expect from this Christmas season: Shoppers may be still out in full force on Black Friday and there may be still lines. What seems to be different this year, however, is that consumers aren’t just looking for general bargains. They will be looking for very specific bargains. Big ticket items are expected to suffer the most.  

About 60% of consumers are estimated to cut back their spending this holiday, according to management consulting firm Oliver Wyman. Cutbacks are believed to affect virtually all product categories from PCs, digital cameras, and music players to premium TV channel subscriptions and landline phone services. Only 21% of consumers intend to increase their spending, Wyman said.

The company expects an overall sales decline of 5-6%. About 50% of respondents reporting they plan to spend less on devices over the next year, which equates to about a 10% drop in sales. However, sales of next-generation devices are expected to increase: Blu-ray players by 140%, smartphones by 9%, and HDTVs by 3%.

NPD chimed in and said that consumers who plan on shopping on Black Friday, a good deal on a specific item is what they are looking for. 54% of consumers who said they will get up and shop early on Black Friday are more interested in deals on specific products rather than just overall bargains. Consumers seem to be reconsidering big ticket purchases and willing to sacrifice either a brand name or premium features in exchange for less money.

Of the 23% of consumers who were considering buying a flat-panel TV (40” and larger), 33% said because of the economy now they definitely are not going to buy one. DSLRs were on the shopping lists of about 12% of consumers, but now 25% of that group said they probably won’t go ahead with purchasing a higher-end camera.

There will be still plenty of shoppers, NPD concluded, but they will be scrutinizing offers and the money they will have to pay. According to the report, brand loyalty will play a big part in DSLR purchases, but consumers said they will be looking for a less expensive model. More consumers said they won’t be as brand loyal for their digital picture frame or MP3 player purchases, with price being the driving factor.

Pricing seems to be most important tool to get people into stores this Christmas season. Wyman noted that “a discount of 20% could motivate a handful of on-the-fence purchasers to buy, but broad discounts might result in an overall decrease in sales revenue.”

“Price discounts should be used cautiously and targeted at on-the-fence purchaser segments when used,” Wyman analyst Mark Teitell said. “There’s a risk of cannibalizing revenue from consumers already intending to make the purchase, without drawing sufficient new buyers to increase revenues overall.”