Quotes of the Day

Let the discounting begin.

Bargain-hunting shoppers turned out in droves for Black Friday markdowns, but they didn't open their pocketbooks as widely as last year, according to several retail firms tracking the data. As a result, retailers are only cautiously optimistic heading into the mainstream holiday season, including today's Cyber Monday, and experts believe that many stores will likely have to revamp promotions and discounting plans to ensure that inventories will be cleared by Christmas.

Already, retailers are moving aggressively. On Cyber Monday HP was offering a 15.6-in. laptop for $299.99, BestBuy.com was touting a 22-in. Toshiba LCD TV for $279.99 with free shipping and Walmart was hawking a Nintendo Wii "Value Bundle," including the console and several games, for $249.

The lessons from Black Friday are already sinking in. Shoppers showed that "they're thriftier, they're savvier and every one of them wants to be the best bargain hunter out there," said John Squire, chief strategy officer for Coremetrics, a Web marketing firm, in a statement.

The National Retail Federation (NRF) estimates that 195 million people visited stores and websites over the Black Friday holiday weekend, up from 172 million last year. However, shoppers spent less, with average spending dipping 8%, to $343.31 a person from $372.57 a year earlier. Total spending over the holiday kickoff weekend reached $41.2 billion, up only slightly from $41 billion a year ago.

Ellen Davis, an NRF vice president, says shoppers were intensely focused on staying within budget. "Shoppers were looking for deals on lower-priced items — such as $10 toys and $9 books, not $1,000 flat-screen TVs," said Davis during a conference call on Sunday.

"They charged in and bought the door busters, and when the door busters were out, it was over," says Howard Davidowitz, chairman of Davidowitz & Associates, a retail consulting and investment banking firm. "By 1 o'clock, there was no more Black Friday — it was over."

Scott Krugman, an NRF vice president, sees Black Friday as a barometer for consumer sentiment but says it's not a slam dunk for how the rest of the holiday season will go. Last year, for example, shoppers spent 7% more over the Black Friday weekend than they did the year before. Yet holiday sales ultimately fell 3.4%, he notes.

"Shopper traffic well surpassed our expectations," says Krugman. However, the dip in spending left him cautious, and he continues to project a 1% sales decline for the total holiday season.

"We still have double-digit unemployment, we still have trouble in the housing market and consumers are still very cautious," says Krugman. "Retailers are still going to have their work cut out for them in terms of keeping the momentum going."

On Black Friday alone, preliminary figures indicate that sales rose a modest 0.5%, to $10.66 billion from $10.6 billion a year ago, according to ShopperTrak, a research firm that tracks activity at more than 50,000 retail outlets. Sales fluctuated by region, with the West scoring the biggest increase at 4.7%. This was followed by the Midwest, where sales rose 1.3%, and the South, which posted a 0.6% gain. The Northeast took the biggest hit, with sales tumbling 4.9%. ShopperTrak co-founder Bill Martin reiterated his earlier projection of a 1.6% sales increase for 2009's holiday season.

Online sales fared considerably better this past weekend. ComScore, a digital research firm, estimates that cyber sales on Black Friday totaled $595 million, making it the second heaviest online spending day so far in 2009 and up 11% from Black Friday 2008. PayPal said it saw a 20% increase in the amount of money people spent using PayPal to purchase items this Black Friday from last year and a 140% spike in the volume of payments made by mobile phones. The mobile-phone transaction increase indicates that buyers shopping at brick-and-mortar sites were likely price-checking items with their mobile phones and then purchasing the item where they found it the cheapest.

Coremetrics reports that consumers spent 35% more per online order on Black Friday than they did a year ago, with the average shopper purchasing 18% more items per order than they did last year.

Even QVC, which sells merchandise on its shopping channel and website, reported more than 765,000 orders totaling $32 million in sales on Black Friday — the highest level in the company's 23-year history and 60% more than last year's Black Friday sales.

"Online sales clearly did better, but that's only 4% of total retail sales," says Davidowitz.

Overall, Black Friday weekend sales indicated consumers' mood and the direction of their spending, says Richard Jaffe, managing director at Stifel Nicolaus & Co. Clearly, shoppers "are deeply focused on price and more thoughtful in their spending."

Davidowitz speculates that the frugal tone will pressure retailers to discount earlier and possibly deeper than originally planned over the next few weeks. "I think many of them will reassess their numbers and determine that more promotions are in order," says Davidowitz. "That will be particularly true in department stores," where women's apparel has been weak, he says.

Black Friday's business has left Davidowitz bearish on retailers' prospects this holiday season. "I expect total holiday sales will be down 1% to 2% — going against last year, which was the worst Christmas in 40 years."

Davidowitz doesn't believe discounting will reach last year's 80% levels, mainly because most retailers ordered up to 20% less inventory this year. "They won't be as panicked or as big," he says. The 70% discounts will likely be offered on select items rather than store-wide, as they were last year.

Marshall Cohen, chief retail analyst at NPD Group, sees the Black Friday glass as half-full rather than half-empty. "The fact that retailers were able to sell as much, if not more, product at a 40% discount, compared with last year's 75% storewide discount, was positive," says Cohen.

"We're not looking at an auspicious start or negative perception in the consumer psyche" after seeing Black Friday's heavy traffic, he says. "But the biggest question is, Will they have the momentum to keep this going?"

• Janet Morrissey
• On Black Friday, the West Coast saw a healthy sales increase, while the Northeast took a tumble. Overall, shoppers were only interested in bargains