Which Way Will the Wind Blow? The Importance of Black Friday

Beyond my duties at PAC to cover the SAP Services market, I also do quite a bit of coverage on the retail sector and I decided today to post some quick thoughts on the economy as well as the importance of Black Friday to the retail sector, and in fact for the outlook of nearly all industries...

When thinking about the current economic situation, it is very clear that the housing bubble, fostered by the financial services industry and low interest rates, propagated the real-estate, construction and banking busts of late... this then led to weaknesses in manufacturing, retailing... and at this point, I believe certainly all facets of the economy due to a lack of financing options, reduced consumer spending and lower business spending. (Dare I point out that unlike the last 2 recessions, IT has not been front and center of this current cycle?).

Given that 70% of the U.S. economy, and for that matter, 20% of the world economy is fueled by the U.S. consumer, a clear indication of the state of the U.S. consumer has never been so important in gauging the state of economic activity to come... and this brings us to the importance of Black Friday.

While many retailers I have spoken to are preparing themselves for the worst, I have also sensed lately a small chance of a "so-so" holiday season, which I think at this point anyone would sign up for! So positives include the U.S. Govt will pumping $800 billion into financial markets to loosen up lending, gas prices are as low as 4 years ago, and while down 5.5% from last year, 128 million U.S. consumers (yours truly included!) plan to brave traffic and parking wars and go shopping this weekend according to some new NRF (National Retail Federation) stats released today.**

In general, retailers have already started with sharp discounts and deals to get consumers to once again buy, and the hope is that once inside the stores, consumers will fall back into some of their usual habits. “Retailers realize that low prices will get consumers into stores this holiday season, and this could be the most heavily promotional Black Friday in history,” said Tracy Mullin, NRF President and CEO. “Shoppers who held off buying a DVD player or winter coat over the last few months will find that prices may literally be too good to pass up.”

This is not to say that high unemployment, the worst stock declines in generations and the gloomy news in general won't set the stage for a pretty disappointing weekend... but the question most are wondering is: how bad will it really be? Perhaps it won't be so terrible? The NRF releases first stats for its Black Friday survey this Sunday at 4pm ET!

Happy Thanksgiving!


** For anyone abroad who isn't as familiar with the term "Black Friday," it refers to the Friday, Saturday and Sunday following Thanksgiving (a day where we eat Turkey and watch football... oh and yes, celebrate the friendship forged in 1621 between the early settlers in Plymouth, MA and the Wampanoag Indians with an autumn harvest feast) where many retailers finally move into the "black" (profit) for the year. Got it??