Are Retailers Shooting Themselves In The Foot This Black Friday Weekend?

Retailers, when it comes to the deals, you better pull out all the stops this Black Friday weekend.

That’s because consumers are expecting even higher discounts this selling season than usual, according to Simon-Kucher & Partner’s 2015 consumer holiday shopping study.
The survey of 1,000-plus consumers found that 50% of shoppers polled cited deals and promotions as wielding a major influence on which stores they’ll shop, and what products and brands they’ll buy.
Walmart’s Black Friday shopping event on Thursday, Nov. 26, 2015 in Rogers, Ark. (Photo by Gunnar Rathbun/Invision for Walmart/AP Images)
For one, when it comes consumer electronics, when retailers from Walmart and Amazon to Best Buy BBY +0.00% engage in what seems like increasingly fierce price brawls every year, consumers expect to see 15% higher discounts during the holiday period, compared to a more moderate difference of 6% for toys and apparel and footwear, Simon-Kucher found.
But for the most part, no matter what the product, retailers can’t afford to sit out the deep-discounting game. The majority of consumers surveyed said they would abandon their preferred stores for a mere 10% higher discount at another retailer.
“These results should be concerning for retailers, especially for consumer electronics specialty stores like Best Buy, since higher discounts would likely put pressure on the already razor-thin margin,” said Susan Lee, who runs the consumer goods and retail practice in North America for Simon-Kucher.
Retailers only have themselves to blame for these expectations, as they kick off the seasonal discounts earlier ever year.

And this year in particular, that early push could mean leaving higher profit margins on the table. That’s because shoppers, most notably, bargain hunters on a budget, are in somewhat of a better position to spend this year than during holiday 2014, when gas prices, for one, were appreciably higher.
“The macroeconomics would say consumers have more disposable income this holiday season to spend.  In fact, the consumers in our survey said they are planning to spend more,” Lee told Forbes. “The unfortunate thing is retailers are so desperate to beat last year’s numbers that they are starting the promotions earlier and earlier.  They rarely even give consumers the chance to pay at a lower discount, let alone full price. Pre-Black Friday events start way before Thanksgiving.  Even though consumers would pay more, retailers are training them to expect more discounts.”

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