November 18, 2014 – Stores are not likely to attract new customers with special sales during the Friday after Thanksgiving known as Black Friday, according to a new survey by the Georgetown Institute for Consumer Research (GICR).
Kurt Carlson, McDonough School of Business associate professor and GICR director worked with research director Ishani Banerji and research associates Anne Wilson and Iris Wang on the Thanksgiving Intent Survey sponsored by KPMG LLP.
“When we consider that one of the biggest reasons to run a sale is to attract new customers who will hopefully spend at full price in the future,” Carlson says, “it does suggest that much of the energy and margin retails are giving up during these holiday sales is for naught.”
Bad for Retailers
The professor says this finding has changed how he thinks of holiday sales.
“I used to believe they were about engaging consumers and making retailer/consumer introductions,” Carlson explains. “But now I see them mainly as good for consumers and bad for retailers. Retailers would be better off if they could agree to not run these sales.”
He says that’s unlikely, though, because some businesses are always likely to run such sales and other retailers will simply follow.
“But consumers don't actually change their shopping tendencies all that much,” Carlson says. “They just get the items they would have bought anyway at a lower price.”
Respondents for the survey were drawn from an online sample of more than 1,000 U.S citizens with a median age of 32 and an average income of slightly more than $42,000.
Paycheck to Paycheck
The survey predicted that spending would be down overall this year for Thanksgiving sales, despite national signs of economic recovery.
“If this isn't the million dollar question, I don't know what is,” Carlson says. “We know that the economic recovery has not been uniform. We also know that those with lower incomes are saving very little, relying on credit and living paycheck to paycheck.
“It is possible that financial problems for these consumers are actually getting worse in real terms and the economic improvements at the top are not offsetting these setbacks at the bottom.”
Carlson says survey data also shows that people in lower-income brackets tend to spend a larger portion of their income on holiday shopping than people at the top of the income distribution.
Electronic Spending Down
“This suggests that people at the top of the income distribution are more likely to be spending discretionary income and are less likely to be financially constrained by their holiday shopping,” he says. “If so, then if the recovery is not being realized at the bottom, the financial constraints will bind there faster and have a bigger impact on their spending.”
The survey also notes that while electronics made up 95 percent of purchases during last year’s Thanksgiving sales, this year they are predicted to make up only 67 percent.
“There were several new items in the electronics category that were extremely popular around this time last year, but that doesn't seem to be the case this year,” Banerji notes. “I haven’t read about any new, big, expensive technology products that will available this season that I am pining for.”
Social Media Sales
Store websites are the most popular resource for consumers to find deals, according to the survey, followed by deal websites, friends and family. Only 5 percent of respondents cited social media.
“One of the big hopes for social media is to push location-specific deal offers to consumers when they are near a retailer's location, Carlson explains. If they work as intended, consumers will experience them in the moment.”
But he says people have a hard time anticipating how they might react to such offers, because they don't know which offers they will receive.
“Another reason could be that retailers have not yet figured out how to realize their dream of targeting consumers with location-specific ads,” Carlson notes. “Time will tell which of these explanations is right.”
Earlier and Earlier
Most of the respondents – 65 percent – were unhappy that Thanksgiving sales start earlier every year, with only 23 percent excited about earlier offerings and 12 percent neutral on the subject.
“It seems to me that we are in a tragedy of the common situation with both the existence of the holiday sales and with their timing,” Carlson says. “If some retailers run sales, other retailers must follow suit to not be left out. And when some retailers start their sales early, others must also start them early to keep pace.
“Since the sales do not seem to provide much benefit to retailers, it is a bit sad that the retailers can’t agree to leave Thanksgiving alone,” he adds. “But to do so would require price collusion and that’s a no-no.”
The Thanksgiving Intent Survey also revealed that consumers plan to spend, on average, $366.67 at Thanksgiving sales this year, that debit cards are the most popular form of payment, followed by credit cards and cash, and that Black Friday is the most popular shopping day, followed by Cyber Monday.
The GICR conducts research throughout the year to better understand various consumer phenomena, Banerji says.
“Typically, these phenomena are general events that are not specific to any time of the year,” she explains. “However, the major consumer holidays like Thanksgiving present a unique opportunity to understand various aspects of consumer behavior centered around one national event.”
In addition to Thanksgiving, GICR explores consumer behavior on Valentine's Day, Tax Day and July 4, among others.