by Doug Desjardins

Early predictions that Black Friday promotions would be tepid compared to last year aren’t panning out as retailers worry that holiday consumer spending may be even worse than expected.

According to estimates from BDO Seidman’s “Retail Compass Survey,” Black Friday sales are expected to rise only 1.8% this year, an improvement over last year but a far cry from the 8.5% jump in pre-recession 2007. The survey also showed that 96% of retail chief marketing officers plan to offer discounts on Black Friday, contradicting the notion that many margin-conscious retailers would sit this one out.

“The level of promotion - even after what happened last year - shows that given the current consumer mindset, retailers believe that deep discounts are just a fact of life,” said BDO Seidman partner Ted Vaughan. “And when the major player, Wal-Mart, is announcing so early in the season that it won’t be beat on price, there’s not much else other stores can do.”

Wal-Mart made its statement in late October by lowering prices on thousands of products and offering weekly specials in November. And its Black Friday Deals, which were leaked in mid-November, include a Magnavox Blu-Ray DVD player for $78, a TomTom GPS navigation system for $59 and children’s reversible fleece jackets for $7.

Target has countered with a 32-inch Westinghouse LCD TV for just $246 along with appliances like toasters and coffee makers for just $3 and a $49 portable DVD player. (Target would not confirm or deny the deals). Kmart and Sears are expected to offer Craftsman drills for $39 and kid’s graphic Ts for just $2.99. Best Buy plans to sell a Compaq netbook computer with a 160GB hard drive for just $179 and a Kodak Easy Share digital camera bundled with a 7-inch digital picture frame for $109.

The deep discounts across the board contradict the findings of a study conducted by the Hay Group in October. The survey of dozens of retail chains including Target and Best Buy showed that only 35 percent planned to make Black Friday their biggest promotional day of the year compared to 45 percent in 2008. Other analysts suggested that retailers wouldn’t need deep discounts to clear their shelves this year because they had reduced their inventories, another forecast that isn’t materializing.

Retailers have also been spooked by new reports that holiday spending - already expected to be slow - could be even worse than expected.  The U.S. Bureau of Labor Statistics reported that unemployment jumped to 10.2 percent in October, raising fears that already-rattled consumers could be even more cautious about spending as job losses continue to mount.

Resources

Black Friday and Cyber Monday Sales both Projection to Grow 1.8% this Year

U.S. Bureau of Labor Statistics

Wal-Mart Holiday Promise: We Won’t be Undersold

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