Retailers Staying Closed On Thanksgiving
With Thanksgiving in the coming weeks, I’ve been thinking about Black Friday and the ever so critical Q4 sales revenue for retailers.
Last year, Holiday sales accounted for roughly 19% of total annual retail sales. For Holiday ’16, the National Retail Federation (NRF) expects sales (excluding autos, gas and restaurant sales) in November and December to increase a solid 3.6 percent to $655.8 billion — significantly higher than the 10-year average of 2.5 percent and above the seven-year average of 3.4 percent since recovery began in 2009.
This year, we’re seeing increasingly more stores opt to vocally “bring back Thanksgiving” and stay closed on Thanksgiving Day (Thursday) in support their workers. On a personal level, I love this – Thanksgiving is a day to be with families and no one should be forced to work while the rest of us overeat and watch the game.
While workers’ happiness is important and plays well into media soundbites, there are also some interesting merchant analytics at play behind the scenes. Walmart*, the nation’s largest retailer – is a good example of data driving the decision. Sam’s Club (owned by Walmart) which competes with Costco (which has repeatedly honored Thursday by remaining closed), will be closed. However, Walmart, which competes more with Target, will be open (as will Target).
When thinking about a customer’s share of wallet (meaning what portion of a customer’s total category spending is at that retailer vs. others) and their wallet allocation behavior (meaning the value of being the first store visited on the shopping trip vs second or third), it has long been known that there is significant sales revenue value in being the first stop vs. the second. Similarly, credit card companies talk about ‘first in wallet’ to differentiate customer preference for one card over another knowing the ‘top of wallet’ indicates card loyalty and usually captures more of the customer’s spend.
Retailers look closely at their ROI of staying open, including competitor wallet information and, therefore, must take their competitor’s behavior into consideration when deciding whether or not their brick stores will be open. To stay open or closed has direct correlations to whether your direct competitor is open, whether you have full relevant inventory available online and the state of your overall ecommerce capabilities and presence. And it’s not so simple as to say ‘you can always shop online on Thursday’ as for some merchants, they know they will lose share and sales.
Data analytics has shown us some interesting cross channel observations. Just because you dominate a customer’s share of wallet in brick does not necessarily mean those same customers will reward you with their loyalty online. In fact, some retailers dominate share of wallet in brick but lose these very same best customers’ wallet share to their competitors – online.
I recall a particular retailer that had decided to open on Thanksgiving Day. The customer purchase data clearly demonstrated the value of increased spend and basket size justifying staying open, but it also showed a precipitous drop when the brick inventory sold out. Their customers shifted to competitor spending – online. So really knowing your customers – and share of wallet purchase behaviors online and off – is critical information when determining whether or not to open or stay closed.
The NRF is forecasting non-store (online, kiosk) sales to increase between 7 and 10 percent to as much as $117 billion. It will be interesting to see the post-Black Friday shopping results this year as ecommerce is likely to demonstrate even greater year over year share increase. For shoppers like me, I will gladly contribute my share from home, while indulging in a slice of pumpkin pie.
*Walmart is currently not on the ‘Closed For Thanksgiving’ list
Pamela Veraart is the SVP and Analytics Practice Lead for C2G.