Now that the election is settled, consumers can get back to what they normally do tomorrow on Black Friday: look for bargains. Right?
Well, maybe not. Now, they may have a whole new worry: Washington’s failure to reach a deal on taxes and the budget might send the economy into a tailspin, termed the fiscal cliff.
Some consumer experts worry that unless Congress and the president can reach a deal, consumers will begin to hunker down. In anticipation of higher taxes next year, they will put their credit cards back in their wallets, turning their backs on discounted iPads and door-busting prices for cameras. Surveys of consumer sentiment already show some weakening.
“Consumer sentiment has slipped especially in terms of where people think we are heading in the future and their own finances,” says Chris Christopher, senior principal economist at IHS Global Insight in Lexington, Mass.
He worries that the current conciliatory tone in Washington might deteriorate if there is no movement. Then, fingers will get pointed and the financial markets will react badly. “If the political actors don’t rise above the fray, consumer confidence will just plummet,” says Mr. Christopher.
However, not everyone thinks the angst over the fiscal cliff will keep consumers from waiting out in the cold at midnight for stores to open so they can buy discounted electronics and toys.
“You don’t cut down on spending $700 or $800 because no one knows what will happen in Washington,” says Bill Martin, founder of ShopperTrak, a Chicago-based retail research organization. “Now that the election is over, there is a lot of pent-up demand. Shopping for the holidays is part of a way of life.”
Although Black Friday is only one day, representing about 4 percent of holiday sales, historically economists have viewed Black Friday as a sort of early litmus test on how eager consumers are to spend for the holiday season. If there are long checkout lines and full parking lots, it might indicate a buoyant season for retailers. However, if the promotions and sales fail to entice hoards of buyers, it might indicate disappointing holiday sales.
The consensus forecast is for the Black Friday weekend and the entire holiday season to be moderately successful.
Last year, at year-end the unemployment rate had started to edge down and consumers’ incomes were rising faster than this year.
“That means consumers will have to rely on credit or dip into savings to pay for things this year,” he says. Adding to the uncertainty for the day is the news that some large retailers such as Walmart and Target will open up on Thursday evening. Some web sites are full of complaints from Americans who feel that the stores are trying to take away family time.
In fact, Mr. Martin says he thinks that consumers will rebel. “I think retailers will spend a lot of money on labor and having the stores open and consumers will not participate,” he says.
The brouhaha over opening up on Thanksgiving comes at a time when consumers are increasingly buying more of their goods on-line. One indicator of this trend: In a survey, the National Retail Federation, which represents retailers in Washington, estimated that 147 million people will go to stores on Black Friday weekend, down from 152 million who said they would last year.
A key factor on whether consumers pile into the car to go to the mall on Thursday night: the deals offered by retailers.
Walmart, the nation’s largest retailer, in its early promotions says it will sell Nintendo Wii Consoles for $89 starting at 8 p.m. on Thursday. For shoppers in the store between 10 p.m. and 11 p.m. Walmart will guarantee they can buy an Apple iPad 16GB with Wifi for $399. The same machine is currently priced at $449 at other retailers.
Target, which will also open up late Thursday, will be selling Nook black-and-white eReaders for $49, a reduction of $50; and Nikon digital cameras for $99.99, a reduction of $100.
Other retailers such as Best Buy will open up at midnight, as they usually do. Best Buy will offer a considerable number of electronics for $199 or less. At higher price points, they will offer exclusives only available at the store.
Such deals are likely to entice consumers, says Martin, who notes that foot traffic is up 2.8 percent for much of the year. He says that consumers are knowledgeable about deals they have seen on the Internet or their mobile devices. “They are still shopping surgically, but this year I think they might be more open to impulse buying than the last four years.”
One of the reasons there might be more impulse buying: Gasoline prices are falling. According to AAA, the price of gasoline, $3.43 a gallon on Wednesday, is down 24 cents-a-gallon from a month ago.
“It puts a little more cash in the pocket,” says Mr. Christopher of IHS.
The weather will be relatively mild in the east and positively balmy in southern California. However, shoppers at the Mall of America will need to bundle up as wind chill temperatures will hit the upper teens. And there could be some showers in the Appalachians.
“None of the weather is too bad for the day after Thanksgiving,” says Mr. Walker.