CE Sales Soar After Slow Black Friday

New York— The holiday selling season got off to a rousing start as deeply discounted CE products helped drive record traffic and sales in the three days following Thanksgiving, but the bulk of retailers' business came after Black Friday, casting doubt on the efficacy of profit-draining door-buster promotions.

According to the National Retail Federation (NRF), total weekend spending hit $27.8 billion — a stunning 22 percent increase over the same period last year, with CE leading the gain. Indeed, some 37 percent of shoppers surveyed by NRF and BIGresearch purchased consumer electronics over the weekend, up 18 percent from last year.

The data was echoed by Visa USA, which reported that retail spending on Visa-branded credit and debit cards increased 11.4 percent year-over-year to $3.7 billion on Friday and Saturday. The greatest increase in card charges — 20.6 percent — was in the “personal entertainment” category, which includes electronics, computers, prerecorded music and video, and bookstores, Visa said.

But despite steep, below-cost discounts on Black Friday morning, which included $380 notebooks and $1,500 42W-inch HD plasma TVs (both at Best Buy), sales were relatively tepid the day after Thanksgiving. NRF said traffic was up 8 percent on Friday, compared to 13.3 percent on Saturday, while ShopperTrak, the Chicago-based retail sales analysts, said Black Friday volume at shopping malls was actually flat year-over-year, down almost 1 percent on sales of $8 billion.

Michael Niemira, chief economist and research director for the International Council of Shopping Centers, attributed sluggish Black Friday sales to a surfeit of heavy discounts by off-mall retailers, the longer selling season, high gas prices and tough year-over-year comparisons. "With the extra Saturday this season, added to the continued influence of high energy prices, the consumer may just be waiting until later to begin their holiday spending," he said.

David Strasser, a hardline retailing analyst at Bank of America, speculated that November and Thanksgiving weekend sales were "adequate at best," and didn't justify the recent run-ups in Best Buy and Circuit City stock prices. He also took retailers to task for their Black Friday practices, which, he suggested, make questionable fiscal sense.

"We cannot believe that stores make money on that day," Strasser said in a research note, citing the higher costs of predawn openings, added security and the margin impact of selling $527 cost Toshiba notebooks for $380 ($200 at Circuit City with a 12-month subscription to AOL).

Moreover, the door-buster specials draw hardcore bargain hunters who cherry pick the promotions and crowd out other customers willing to purchase non-sale items. These guerilla shoppers represent the same unprofitable customer base that Best Buy has been trying to jettison through its customer centricity initiative, Strasser argued.

But the ploy apparently achieved its top line goals at Wal-Mart's titular discount and Sam's Club stores, where sales during the early-bird blitz were "good" and exceeded plan, the company said. Wal-Mart had fanned the Black Friday flames by posting its specials online days in advance, and by offering a price match on competitors' identical promotional items. Traffic remained "good" and "steady" after the sale period as well, as customers snatched up such best-selling products as computers, portable DVD players and video games, Wal-Mart reported.

Retailers were expected to receive another sales boost last Monday when shoppers supposedly turned to the Internet en masse for holiday bargains. According to Shop.org, a division of NRF, 60 million consumers were expected to participate in "Cyber Monday," the "official kickoff" for online holiday shopping and potentially one of the biggest online shopping days of the year.

"Online retailers will be ready for the surge in traffic and will be offering sensational promotions on Cyber Monday," said Scott Silverman, executive director of Shop.org. "Though millions of consumers spent the weekend in stores, they will be rounding out their shopping by heading online to look for gift ideas, compare prices, and buy."

PriceGrabber.com, an online comparison shopping service, had already discerned a strong surge in online shopping on Black Friday, when the site saw a 77 percent increase in the number of shoppers over last year.