Prediction Calls for Happy Black Friday

Market research firm IBISWorld predicts a small gain in Black Friday retail spending in 2009 and a very modest advance in holiday season revenues thanks mainly to food.

A Black Friday improvement over last year would be welcome, as it was the strongest part of holiday season 2008 for retailers. IBISWorld expects total retail sales on the traditional Black Friday weekend to advance by just under three percent from last year to $42.9 billion, with 77 million people preparing to swarm stores on Black Friday alone.

Consumers still look at Black Friday as an opportunity to grab some real bargains. Thereafter, they and retailers will revert to their annual game of chicken, where consumers hold out for deals and retailers hold on to as much of full price as they can for as long as they can. Retailers will be in a stronger position this year. They have kept their inventories lean. They have even demonstrated a willingness to sell out of popular items rather than be stuck running profit-sapping clearance sales. Consumers, however, have made a virtue out of denying themselves and may simply chose not to purchase if they can’t get an acceptable price. So, retailers must discount to gain consumer interest, yet the question becomes how much and with what. Retailers who get the balance right will have the strongest seasons.

“Consumers have become accustomed to sales and deep discounts during the past year, but retailers have low inventory levels this season and will try to keep prices high,” said Toon van Beeck, IBISWorld senior analyst.

The firm forecasts that consumer spending on Thanksgiving itself will increase by three percent from 2008, reaching $29.9 billion, which is a relative improvement but still below the $30.7 billion posted in 2007.

The firm’s analysis suggests the consumers are going to focus on entertaining themselves and each other throughout the holidays, an outlook that favors stores selling traditional fare and alcoholic beverages. In fact, The Nielsen Co., in its holiday predictions for 2009, said that all categories associated with at-home entertainment will have an advantage in the current season, including not only alcoholic beverages but cookware, kitchen items, and bed and bath accessories as well.

Gains for the overall holiday season will be modest, the research firm asserts. Food and drink sales will gain 12 percent over the holidays reaching $27.7 billion. Like Thanksgiving, the category has a way to go before regaining its pre-recessionary footing, however, as 2006 holiday sales came in at $28.5 billion. Still food sales turned what might otherwise have been a negative seasonal prediction into a positive, as decoration sales will advance by less than one percent to $8.3 billion, gift sales will decline almost three percent to $81.91 billion and “other” sales, including flowers, cards and postage, will slip almost five percent to $10.2 billion.

In total, IBISWorld expects holiday sales to advance by meager — okay, almost nonexistent — degree, officially stated as 0.2 percent.