Black Friday: It has to be big, and bold
Given the severe slump in spending, discounts will be the deepest they've ever been this holiday season as merchants strive to stay alive in 2009.
NEW YORK (CNNMoney.com) -- Merchants know it's all or nothing when the clock strikes 12.01 a.m. Friday.
For many retailers, their survivability depends not only on having the biggest, boldest Black Friday sales they've ever had, but also on making sure that the critical holiday shopping season doesn't begin and end on the day after Thanksgiving.
Industry analysts warn that there's a high risk of that happening, given that many Americans are in a serious spending lockdown that has already pushed several retailers - including electronics merchant Circuit City - into bankruptcy.
"The bad news is that this could be the worst holiday [shopping] season on record," said Marshal Cohen, chief retail analyst with NPD Group.
"People will line up at 5 [a.m.] for the doorbuster deals," he said. "There'll be a little bit of frenzy for the $400 computer. And it will all be over by 10 [a.m]."
Consequently, Cohen predicts that sales for the November-December gift-buying period, which kicks off on Black Friday, could fall 3%.
The day after Thanksgiving is dubbed "Black Friday" because it traditionally marked the day of the year when retailers finally move out of the red, indicating losses, and into the black, representing profits.
Any decline in holiday sales is a dire scenario in an already crippling year for retailers since the two-month period can account for as much as 50% of merchants' annual profits and sales.
Cohen said this is the first time that he's forecasted a decline in holiday sales. And he's not the only one.
Other analysts are even more bearish with their forecasts.
Richard Hastings predicts holiday sales will tumble 6% to 8% this year.
Hastings, a consumer strategist with Global Hunter Securities, cites the "collapse of home equity," "two years of soaring energy prices" and accelerating job losses leading up to the holiday season for his estimates.
Britt Beemer with America's Research Group anticipates holiday sales will slip 1%, his first negative prediction in 23 years.
"This year looks so bad that even normally good signs for retail sales, such as more Americans staying home this Christmas, can't save the season for retailers," Beemer said.
For its part, the National Retail Federation (NRF), the industry's largest trade group, is a bit more hopeful. The NRF expects holiday sales to rise 2.2%, which would still be the weakest gain in 6 years.
Not only are consumers expected to retrench on their holiday-related purchases but Black Friday and the Thanksgiving weekend will also likely see fewer Americans hitting stores.
The NRF said its survey indicates that about 128 million people will commence their gift buying this Friday, Saturday or Sunday after Thanksgiving, down from 135 million the previous year.
That said, NPD's Cohen said retailers really have to go all out and make the most of each day.
To his point, department store chain J.C. Penney (JCP, Fortune 500) announced Tuesday that its Black Friday sale will have "the most compelling Black Friday prices ever offered in the Company's history" with more than 400 categories of products featuring deep discounts.
"Given the current economic environment, J.C. Penney understands the issues facing our customers, and we are committed to offering the season's most affordable gifts," said Ken Hicks, president and chief merchandising officer for J.C. Penney.
"[Retailers] have to give people what they want at any price," Cohen said. "Shoppers will see 75% off on Black Friday and all week after that. I've been doing this for 33 years and I've never seen 75% off signs in mid-November."
Some malls are opening for business on Thanksgiving Day this year because their retail tenants don't want to wait until Black Friday to jumpstart sales.
But mall operators, too, are struggling to stay in business after several struggling retail chains shuttered their underperforming mall-based stores.
For the first time in its history, all of the 11 shopping centers owned by Craig Realty will open at 11 p.m. on Thanksgiving Day.
At one of those centers - Los Angeles-based Citadel Outlets - the Old Navy store is opening as early as 9 p.m. Thursday and both the Tommy Hilfiger and Guess stores are opening at 10 p.m., according to spokeswoman Anita Boeker.
"The earliest that we've opened our centers is midnight. But our tenants are much more aggressive this year. They are nervous," she said.
Smart online sellers, who realize that many cost-conscious shoppers will likely shift some of their holiday shopping online this year for better prices and free shipping, are rushing to grab their share of Black Friday dollars.
On Monday, Ebay (EBAY, Fortune 500) introduced "$1 Holiday Doorbusters." The company said 100 gift items, such as digital cameras and GPS devices, and one luxury item, including a brand-new Chevrolet Corvette, will be listed each day until Dec. 8 on eBay.com for a $1 fixed price.
"Look, there is pent-up demand among consumers," Cohen said, pointing to the huge demand for the $250 BlackBerry Storm smartphone that launched this week.
"In this environment, it's absolutely necessary for retailers to have compelling merchandise if they want reluctant consumers to spend money," he said. "Otherwise 2009 will be just like this year has been for retailers."