Thanksgiving Shopping: Can It Turn Retail Revenues from Bleak to Black?

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Customers take the escalator as they shop at a Toys "R" Us store in New York November 24, 2011.

Thanksgiving has traditionally been a day for family, turkey and football, but increasingly retailers are viewing the holiday as a chance to kick the Christmas shopping season into high gear.

This year, stores including Best Buy, J.C. Penney, Kohl’s, Macy’s and Toys “R” Us, will open their doors just after the sun goes down on Thanksgiving, betting that consumers will be done with dinner and ready to cross some gifts off their shopping lists. Meanwhile, Nordstrom, Costco, BJ’s Wholesale Club and others have put out statements saying they will remain closed, as they always have, out of respect for the holiday and for employees who want to spend it with their families.

But is either camp really coming out ahead? It’s a wash, Wharton experts say, while predicting that as an increasing number of retailers decides to add Thanksgiving hours, it is only a matter of time before almost everyone joins in. “[Opening earlier and earlier] is not going to lead to more retail sales, and there is not much of a competitive advantage,” notes Wharton marketing professor Stephen Hoch. “At the same time, there is no benefit to not opening on Thursday; the higher moral ground really doesn’t matter.”

The trend of stores opening on Thanksgiving is relatively new. It began with brick and mortar retailers deciding to open early — 3 a.m. and 4 a.m. — on Black Friday. Then, in 2010, stores like Toys “R” Us and Walmart started opening at midnight on Black Friday. Over the past three years, that 12 a.m. start has been pushed back hour by hour, with the average opening time now coming in at 7 p.m. on Thanksgiving.

However, just 14% of consumers surveyed in the National Retail Federation’s holiday spending survey said they plan to shop — online or in stores — on Thanksgiving (and some could start browsing in person as early as 6 a.m. that day, thanks to Kmart), compared with 42% who said they will shop on Black Friday. Another 38% planned to forgo all holiday shopping during the Thanksgiving weekend, making the total number of expected shoppers for the big weekend lower than the previous year at just 140 million.

Still, total holiday sales are expected to be up, albeit by just 3.9%, from 2012, to $602 billion. This figure is more than the pre-recession levels of 2007, which were followed by two years of significant drops.

A Time for Shopping

The reason most store executives give for opening during the waning hours of Thanksgiving — and staying open through Black Friday night — is customer demand. Officials from Best Buy, which plans to open earlier than ever this year, said in a press release that they decided to open at 6 p.m. because “last year, millions of people made it clear that they wanted to shop on Thanksgiving evening.” Macy’s conveyed a similar message when it announced its earliest opening time ever: “In response to interest from customers who prefer to start their shopping early, most Macy’s stores will open at 8 p.m. on Thanksgiving evening, consistent with many other retailers.”

The last phrase in the Macy’s statement may allude to the real reason many stores are opening — peer pressure. Hoch says that most retailers would probably prefer to sit out the holiday. But once their competitors began opening earlier on Thanksgiving, others felt compelled to follow suit. “If you stay closed, you are not going to get enough credit from employees or the public [for doing so]. You have to be out there or run the risk that competitors might get the sale before you,” Hoch notes.

Additionally, Thanksgiving falls late in the calendar in 2013, meaning that retailers have just 26 shopping days between the holiday and Christmas — the shortest possible time. Consequently, this year in particular, retailers want to get in as many shopping hours as they can, according to Wharton marketing professor Barbara E. Kahn, director of the school’s Jay H. Baker Retailing Center. “It’s an important period for retailers — with 30% of sales coming from the holidays — so they can’t afford to miss a day.”

There is also the ever increasing pressure from online retailers, which are open 24 hours a day, every day. In 2012, online sales during the holiday season totaled $43 billion, according to digital research firm comScore, up 13% from the previous year. While that accounts for only 7.4% of total holiday sales, based on estimates from the National Retail Federation, almost everyone expects this percentage to only increase over the next few years. Additionally, 53.5% of online retailers say they will offer promotions specifically for Thanksgiving Day, the National Retail Federation reports, although it is unclear whether this is in response to brick and mortar stores opening earlier or just online retailers getting a jump-start on Cyber Monday.

“Part of it is that Amazon is open all the time, and [brick and mortar retailers] are feeling the pressure to open as well,” says Wharton marketing professor David Bell.

A Time for Family

Still, opening on a day traditionally reserved for families can definitely have a negative effect, says Wharton marketing professor Cassie Mogilner, who points to research showing that consumers tend to have negative views of companies that appear materialistic and money-driven (the perceived reasons for opening on Thanksgiving). In fact, users of the website have created nearly 60 different petitions that have collected almost 200,000 signatures in total, asking specific stores to “Save Thanksgiving.” The petition against Target (which is opening at 8 p.m., an hour earlier than last year) alone has collected more than 95,000 signatures. And Walmart’s 6 p.m. opening is only adding fuel to the fire of employees who plan to protest on Black Friday to bring to light complaints about low wages and recent unjustified firings.

“It’s really smart to take a stand and protect your relationship with consumers and employees,” Mogilner notes. “The goodwill perception of the brand will have a longer impact than the initial money gain.”

Stores that do open likely won’t experience a notable gain in sales, Hoch adds, because revenue from Thanksgiving Day will just take away from Black Friday receipts. In addition, retailers are shouldering the extra operating costs of opening up their buildings for half a day and paying employees higher holiday wages. “It’s really inefficient to [open] on Thursday,” Hoch states.

Most of the stores that are remaining closed on Thanksgiving this year have always taken the day off, and are simply using their competitors’ decision to open as a way to market themselves as retailers that place greater value on the importance of family. “We feel so strongly about our employees spending Thanksgiving with their families,” a spokeswoman for TJX, the owner of TJ Maxx and Marshalls, told USA Today.

But many of the retailers that are promoting their Thanksgiving closures are not typically associated with holiday shopping madness anyway. For example, Kahn points out that Costco garners much of its revenue from the memberships that consumers must buy to shop there. Nordstrom is considered high-end retail, Hoch adds, and for decades has relied on a strategy of bulking up revenues during its annual anniversary and half yearly sales. In other words, Nordstrom shoppers, too, aren’t the typical Black Friday — or Thursday — kind of crowd.

According to Bell, the only retailers that actually stand to benefit from opening earlier are specialty retailers like jewelry or electronic stores and higher-end retail where people don’t typically do their everyday shopping. As for the likes of Target and Walmart, “People are going to buy the same detergent on Thanksgiving that they would have bought any other day.”

Republished with permission from Knowledge@Wharton, the online research and business analysis journal of the Wharton School of the University of Pennsylvania.