How the Grinch Stole the Retailer's Christmas

Forecasts of a Christmas shopping season so dismal they'd make the Grinch grin drove even more retailers to open at 4am on Black Friday to lure shoppers with early bird bargains. Unfortunately, this strategy may have actually backfired.

On the Wednesday before Thanksgiving, it seemed the strategy would be successful. Newspapers and radio stations everywhere were interviewing people who intended to first on line for early bird bargains on Black Friday. Their reasons ranged from getting the new X Box before it sold out to people just looking for an excuse to throw a parking lot tailgate party on Thanksgiving night. Shoppers said they would come early and they did.

Although not as many as retailers hoped, people camped out in Circuit City parking lots. Some had Super Bowl caliber tailgate parties outside the shopping malls. Others just tried to stay awake in their cars waiting for the stores to open at the crack of dawn.

They came to shop and they did. But unfortunately for retailers many only came for the one special sale item and then went home to bed. They didn't stay at the mall from dawn until dusk snapping up bargains and spending money at every shop they could. In fact, some retailers reported that after the early bird feeding frenzy, customer traffic was actually lower than on any ordinary Friday.

Throwing a special sales event with special prices or discounts only available for a few hours makes sense from a marketing and behavioral perspective. People are motivated by greed. People feel good when they get a bargain and save money. So if a shopper is planning to buy a specific brand plasma TV, video game console, toy or other hot new product and can get it for 40% off just by waking up earlier - they'll do it.

The early store openings and early bird sales brought out the people who were going to buy those products anyway. They picked up the sales item they wanted and perhaps a few more products too. What they didn't do is hang around longer and spend more on other items and in other stores.

High gas prices are making shoppers think twice about when they shop, how far they drive to shop and how much they're going to spend on Christmas gifts this year. With gas prices in some areas as high as $3.50 a gallon, a trip to a mall 20 minutes down the interstate is now a costly excursion. One shopper interviewed reported it cost her $100 to fill up the tank of her pickup truck that had a gas guzzling V 8 engine. She planned to make only one holiday trip to the mall this year, and that would be later in the holiday shopping season when she thought discounts would be even bigger than on Black Friday.

Forecasts of slow season for retailers are also making many shoppers take a wait and see attitude. Price conscious shoppers are betting a low sales will make retailers have bigger discounts at the last minute. One woman from Miami who planned to visit family and friends in California for New Year's Eve said she would buy all their Christmas gifts at the "After Christmas Sales" before she left on her trip.

Household budgets have gotten tighter for many families resulting in shorter Christmas lists and lower priced gifts. Many homeowners are facing foreclosure or making higher monthly mortgage payments because the rate on their ARM (adjustable rate mortgage) skyrocketed. A flat real estate market and increasing gas prices are just additional reasons to feel uncertain about the future and cut back on holiday gift spending.

This year expect online sales to have more of an impact on "brick and mortar" retailers. More people than ever are shopping online. Now people are very confident with online shopping. It took a while, just like it took with mail order shopping and shopping by phone, but people discovered there are many advantages to shopping on-line. It takes only minutes to compare prices on the same item from different web sites to make sure you're getting the best price. In fact there are an increasing number of price comparison sites that do all the work for you.

Online shopping is also easier and convenient. You can do it any time of the day or night, in your underwear, having a cocktail - something you can't do in most stores. It's also very often cheaper to shop online because there's no need to fill up the car or pay for parking. Many online retailers are offering lower prices than the shopping malls are throwing in free shipping too. Not having to deal with pushy shoppers and rude store clerks is just icing on the cake.

Traditional retailers have enough going against them with economic factors and high gas prices keeping shoppers away. Now they have an E-Grinch that's eating into their Christmas profits too.

Early bird shopping events and sales aren't enough to create record Christmas shopping sales for brick and mortar retailers. The solution lies in offering customers more super low prices, extraordinary value, speed, ease and convenience plus a pleasurable shopping experience. It's a big list - even for Santa Claus.