What 4 charts from Black Friday 2016 tell us about this year
The big shopping day is key for retailers across the sector. Here are some of the top trends we saw last year — and can expect to see again.
Grocery stores are filling up with shoppers hunting for the perfect turkey, and die-hard Black Friday shoppers are making strategic plans for crowded digital and physical shopping malls. The all-important shopping day is practically upon us.
Every year brings with it new horror stories, feel-good moments, hot products and, of course, winners and losers. So what are some of the trends we can expect to see this year? Data from Earnest Research helps explain the top four trends from Black Friday 2016 — and what we can expect from the big shopping day this year.
1. Department stores are losing out
When it comes to which apparel retailers reap the most benefits from Black Friday week, the data from Earnest Research tells a familiar story. Off-price retailers edged up their profits last year, with Ross and TJX posting marginal growth year-over-year for the shopping week, and Nordstrom continued to be a standout in the department store sector, where most others faltered.
Department stores like Macy's, J.C. Penney's and Sears were among the biggest losers of Black Friday week 2016, with negative year-over-year growth. Macy's dropped 3.4% from 2015 and Sears dropped a massive 16.6% over the same period.
While Macy's won't be making any changes to its 5 p.m. Thanksgiving opening time, others have adjusted their holiday plans accordingly, with J.C. Penney opting to open an hour earlier than last year — at 2 p.m. — and Sears letting shoppers in from 6 p.m. to midnight on Thanksgiving and from 5 a.m. to 2 p.m. on Black Friday, giving customers an extra hour of shopping time on Black Friday.
Some studies, however, show that opening early might not be the best plan — only 17% of Americans favor store openings on Thanksgiving and for some retailers, the costs of opening might outweigh the benefits.
2. Even big players are seeing slower sales growth
Even for some of the industry's stalwart retailers — Amazon, Target, Best Buy and Walmart — sales growth during the big shopping week is slowing down. Walmart's sales have grown increasingly negative over the years, worsening from -5.8% in 2014 to -9% last year, while Target has followed a similar trajectory, decreasing from 1.4% sales growth in 2014 to -6.9% last year.
Although Amazon has managed to maintain positive sales growth over the years, the e-commerce giant's growth slowed considerably in 2016. From 21.3% in 2014 and 23.9% in 2015, Amazon's sales growth slowed to 10.7% last year. Best Buy is the only retailer out of the four whose sales have increased from 2015 to 2016, making a huge recovery from -12.7% in 2015 to a sales growth of 2.5% last year.
Whether this trend shows that Black Friday really is losing popularity or not is another question. Certainly, part of the difficulty for these retailers is that they compete so heavily on price. While Amazon largely seems to be winning the price battle, Walmart is struggling to compete with the online retailer, including offering free shipping for orders over $35, which remains $10 higher than Amazon's $25 free shipping threshold.
Amazon also has the added benefit of being an online marketplace, meaning the retailer can start Black Friday sales whenever it chooses to and doesn't have to suffer the same opening costs that brick-and-mortar retailers do. That could mean more troubling year-over-year sales growth at Walmart and Target especially.
3. Amazon is stealing market share
While Amazon might make a big deal of its self-made holiday, "Prime Day," on which it bested Walmart, Best Buy and Target on price, Black Friday is also an important time for the company. Earnest Research found that Amazon's market share is only increasing against those rivals during the Black Friday week, as their share of the market dwindles.
While Walmart still controls the largest amount of market share, at 35.5%, Amazon is quickly gaining on the big-box retailer, coming in at 33.4%.
Target and Best Buy, for their part, have remained relatively steady over the years, with Best Buy losing about 1% of market share over the past three years and Target giving up 2% during the shopping week, compared to Walmart's loss of almost 7% and Amazon's gain of close to 10%. As Amazon jumps into different markets, opening up private label lines in everything from athletic wear to furniture, the retailer will likely continue to rub up against its rivals and steal market share from those who don't keep up.
That's not to mention all of Amazon's recent efforts on the delivery front, which cover everything from drone patents to keyless in-home delivery. That, paired with the retailer's generous free shipping policy (an increasingly important quality to holiday shoppers), is likely to continue to give retailers trouble during Black Friday week.
4. Grocers are bringing home the bacon (and the turkey)
In addition to being a big time for gift-buyers, the Thanksgiving weekend is also key for grocers. Consumers are running to their favorite grocery retailer for supplies long before the Thanksgiving table is set and according to the data from Earnest Research, sales on those groceries are paying off.
In the week leading up to Thanksgiving, almost every grocer Earnest Research studied posted year-over-year sales growth, from a massive 21.5% at Smart & Final Stores to smaller increases at more niche grocery stores, like Whole Foods (3.8%) and Trader Joe’s (2.8%).
Whole Foods could feel an even bigger this year, since the Amazon acquisition in June has led to significant price drops and an increase in store traffic at the organic grocer. The new leadership and cheaper price point could convince price-conscious shoppers to spend more of their paycheck there this year, rather than at some of the less-expensive grocers.
Although the Fresh Market and Ahold Delhaize did post a sales decrease year-over-year, on the whole the market is looking pretty good for Thanksgiving Day stock-ups — and with consumers increasingly turning to grocery delivery and e-commerce sites to prepare for the dinner, retailers have several avenues through which to drive more sales.
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