Retail Christmas Wasn't Boom or Bust

Photo: Reuters / John Gress

According to data from two dozen major companies, retail sales in December were up about 4% over the prior year's results, giving Wall Street the rosy perception that the season was essentially a successful one. As usual, marketers found ways to motivate consumers to shell out a few more bucks than they did last year, a result which typically signifies a healthy holiday season.

What is less talked about than the top line sales results, and far less encouraging, is the hidden "cost" of these added sales. In most cases, December sales gains were driven largely by deep discounts (several mall retailers ran "40% Off Everything" deals in the week before Christmas), as well as gimmicky promotions and extended store hours, all of which take a hefty toll on product margins and operating profitability. We won't understand the complete picture of the 2011 Christmas retail season until we see quarterly profit & loss statements from these companies.

With improved sales but potentially compromised profits, Christmas results are ultimately a mixed bag for retailers. Strong and moderately healthy companies will forge ahead, and a few companies who started the season from a considerably weaker position, and who then sold their souls just to get customers to cross their lease-lines, may not live to see the end of 2012. There is one macro upside though - the increased spending is a good sign that consumer confidence is on the rise, and when you add to that the steady improvements we are seeing in the job market, there is hope for continued slow but steady economic recovery.



Related Stories: December Retail Sales Are Sluggish, Black Friday Results and Holiday Trends

December Retail Sales Are Sluggish

I predicted the sharp drop in December retail sales and the resulting corporate panic here almost three weeks ago.

It's good news for consumers as we're already seeing steep discounts, and "Super Saturday" bargains (12/17). It's bad news for retailers who must scramble for business in the last week before Christmas, and who now see that their Black Friday extravaganzas served mostly to shift consumer traffic peaks and cost them precious margin dollars.

Black Friday Results and Holiday Sales Trends

Shoppers waiting in line at Best Buy.

Two weeks ago I wrote a blog post encouraging consumers to avoid the newly created Thanksgiving Day retail super sales, in the hopes of reminding people about the dual impact of patronizing big box stores on a major holiday. When you show up to purchase your crazily discounted X-Box on Thanksgiving, you send a message of encouragement that tells retailers you don't mind shopping on an important holiday, which by default means you are comfortable asking others to enjoy their turkey feast in a break room instead of at home with their families.

Well, the overnight stampedes are over and the pepper spray has been dispersed. Black Friday retail sales results have been reported, and the expert conclusion is that those mega-discount events were indeed successful in driving customer traffic - BUT they have likely only shifted the finite spending consumers planned for the holiday to happen earlier in the season. I suppose if you're Target, Best Buy, or Toys-R-Us this may still be good news because at least you know "you got yours" this holiday season, but at what cost?

Beyond the diminishing respect levels between big corporations and their employees (which sadly is of no concern to most companies), there is also the issue of compromised profitability. Doorbuster sale items are typically sold below the retailers' costs, and if aggressive marketing doesn't somehow convince shoppers to purchase several regular priced add-on items, then the doorbusters simply erode profit margins.

Boycott Stores on Thanksgiving and Christmas

Big box retailers Target, Toys-R-Us, and Best Buy are among the chain stores who will open their doors at midnight or even earlier this year on Thanksgiving night.

I won't be there to greet the holiday shopping season, and for that matter I won't spend a dime in any store anywhere on Thanksgiving day or Christmas day.

Enough is enough.


For salivating shoppers who have created a holiday tradition out of attending "black Friday" door-buster sales, these midnight openings may add a fun and twisted new element to the holiday shopping circus. For tens of thousands of retail employees though, this represents another thoughtless business decision that further separates people from the essence of what makes holidays like Thanksgiving and Christmas special - the opportunity to take a single day away from the rat race, to breathe deep and reflect on what really matters, and to spend quality time with people you love.

I understand, better than most, that retailers are scrounging increasingly harder every year to capture their piece of the all-important Christmas pie, and frankly, while the commercialization of Christmas can be a bit annoying from time to time, that's not what bothers me.