Black Friday Sales Drop For First Time In Seven Years

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Could a poor Black Friday showing be setting the United States up for another drop in consumer spending or possibly even be foreshadowing a recession? While that statement might be a bit strong, consumer spending dropped by $1.7 billion dollars, causing worries among many retailers and economic analysts.

Total consumer spending weighed in at $57.4 billion dollars, down from $59.1 billion dollars last year. Black Friday sales themselves dropped by 11% as retailers tried desperately to lure in shoppers on Thursday and earlier in the week. It appears that a decent number of shoppers did just that, but then decided to sleep in on Friday. Traffic was down 11% while sales dropped 13% on Black Friday.

Consumers increasingly unwilling to be lured past ‘door busters’

Perhaps even more tellingly, retailers reported record crowds throughout the entire weekend, but declining sales none-the-less. It is believed that 141 million people headed out for weekend shopping, vs. 137 million last year. This suggests that people are out bargain hunting and not willing to splurge on more expensive items. Usually, retailers use “door busters” to lure customers in and then also get them to make additional purchases.

The larger crowds throughout the entire weekend were also supported by retailers being open on Thanksgiving day, but with sales declining and shoppers focusing only on deals, the economic benefits of the tactic are questionable. Many retailers have already come under fire for forcing their workers to work on Thanksgiving, a day normally reserved for family and friends.

Retailers have cited stagnant wages and economic uncertainty as the primary driver behind declining sales. In the past, weather and other circumstantial conditions were often the primary culprit for declining sales during the holiday season and normally clear weather would result in a bump in sales. Now, however, systemic conditions may be causing a permanent shift in spending habits among American consumers.

Black Friday trends a sign of consumer shifting

Disposable incomes have remained largely stagnant through the last four years. At the same time, rising health care, energy, and other costs are eating up more and more of the total amount of disposable income available. Further, with housing prices remaining weak, many people facing retirement in the near future are focusing on saving, not spending.

The steep decline in spending may force retailers to keep prices low throughout the holiday season.Wal-Mart Stores, Inc. (NYSE:WMT) and Target Corporation (NYSE:TGT) have already slashed their profit projections through the year after weak back-to-school shopping sales, and a weak holiday sales season could have a huge impact on the companies’ bottom lines. Further, with 70% of the US economy being driven by consumer spending, a drop in said spending could have huge ramifications for the larger economy.

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