Retail Strain During Peak Shopping Season

We look at the peak shopping periods, especially November and December, to see where capacity problems might be happening in retail. This season, it is clear that most of the retail sector has far more capacity than it needs.

The surprising change that everyone is talking about is the disappearance of Black Friday. This shopping day, the day after Thanksgiving in the United States, is traditionally the peak of the Christmas shopping season. That is not to say it is the busiest day of the year of the year at retail — that honor often falls, by a narrow margin, to the last Saturday before Christmas — but Black Friday is the day when retailers can say they are over the hump.

This year, at most retailers, Black Friday never happened. The day counts as a big day at retail only if you include the Thanksgiving evening and overnight doorbuster specials at perhaps two dozen major retail chains. If you look only at the daylight hours, though, the day was a dud, with shoppers staying away in large numbers. In my local area, from what I could see, retail traffic during the day on Black Friday was actually less than any of the previous eight Saturdays.

You can tell just by looking at retail parking lots. Malls and shopping centers calculate their parking lot size based on the potential for Black Friday traffic. This year, many retail parking lots were never filled beyond 25 percent of capacity. This also implies that the stores themselves could be smaller without the risk of shoppers feeling crowded. Perhaps it is that not so many store locations are needed. Either way, there would seem to be more retail space than shoppers can foot the bill for. The large number of vacant stores, a problem of the last 12 years, will not be filled anytime soon.

There were short-term problems online as retail servers exceeded their carrying capacity during one-day or shorter online sales events. This happened at large and small web stores alike. Some shoppers couldn’t reach major web stores at all during sales, and some web store had shopping cart and payment issues during periods of peak traffic.

This season is the first big test of Amazon’s in-house package delivery service, and all is not well. Packages were mostly delivered on time, but on the busiest days a frightening proportion, more than 10 percent from what I have heard, were delivered to the wrong location. My guess is that Amazon has incorrect geographical information on addresses and that drivers are being held accountable for delivering on time but not for delivering to the right location.

It is hard to guess how the revenue numbers will add up for this season, but what is already clear is that shoppers are paying less attention to shopping than in past years. Revenue could be lower just because so many toy purchases already took place at a major liquidation earlier in the year, but a confident mood among shoppers could lift prices and sales revenue. However, the reduced attention among shoppers and reduced traffic at stores are warning signs that may indicate reduced spending in the future.

Retailers are relying too much on temporary price reductions to grab shoppers’ attention, and there are at least two problems with that strategy. First, there are the capacity issues I mentioned, and second, shoppers focused on the difficult challenge “winning” the coveted sale item often cannot spare much attention for the impulse purchases that retailers count on.

In general, impulse purchases can happen only when shoppers are paying attention, so the decline in attention points to a coming decline across the retail space. Impulse purchases are often the high-markup items that make a retail store profitable, so some stores could lose their footing unless new ways are found to make shoppers pay more attention to the shopping process. Yet it may be that nothing will do this if shoppers are determined to reclaim some of their shopping time for other purposes.

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