Not morality...

Reality, not morality, drives retailers to close on Thanksgiving

By Thomas Lee

With the Mall of America and retailers like Office Depot joining a list of chains that won’t open on Thanksgiving, the popular consensus is that the industry has finally realized that the holiday is a time for family and reflection, not commerce.

Right. And I’m Santa Claus.

What we’re witnessing is not some moral reawakening but rather a pragmatic response to reality. Since Walmart, Target and even online giant Amazon normally dominate sales on Thanksgiving and Black Friday, it no longer makes financial sense for some brick-and-mortar retailers to open on the holiday, given flat consumer spending and shrinking profit margins because of deep price cuts.

Instead, chains like Barnes & Noble, Lowe’s and Staples hope to boost online sales and concentrate their efforts on the weekend before Christmas, which some analysts believe has supplanted the flagging Thanksgiving weekend as the most crucial period of the holiday shopping season.

“It costs money to pay employees and keep the lights on,” said Brian Kilcourse, managing partner at RSR Research consulting firm. “Though retailers can claim some moral high ground, the reality is that profitability and sales on Thanksgiving is not nearly as pretty of a picture. What exactly is to be achieved other than looking like you’re competing?”

The move toward Thanksgiving began about five years ago when Walmart decided to open at 10 p.m. on Thanksgiving Day. Target, Best Buy and Kohl’s announced they would open at midnight. Facing stiff competition from Amazon, which had been running Black Friday promotions several weeks earlier, the chains attempted one-upmanship against their weaker brick-and-mortar rivals. The trend stuck in subsequent years, creeping even earlier into Thanksgiving Day.

But some retail formats are just not compatible with mobs of crazed shoppers breaking down doors and stampeding for a good deal. That’s certainly not the image that luxury retailers like Apple, Nordstrom, and Neiman Marcus want to project. And shoppers are probably not excited about spending a cold Thanksgiving night waiting in line at Home Depot or Petco.

Moreover, people are just spending less money. During the long Thanksgiving weekend in 2015, shoppers spent an average of $300 per person, a 26.2 percent decline from 2013, according to the National Retail Federation.

ShopperTrak analytics firm said sales during Thanksgiving Day last year totaled $1.76 billion, a 12.5 percent decrease compared with 2014.

However, retailers are taking a big risk by simply ceding the holiday to the likes of Walmart and Target. There are only so many shopping days until Christmas, and every day counts in such a fiercely competitive industry where retailers cut prices to steal market share from one another.

Thanksgiving still brings out the masses, especially the coveted Millennials. The National Retail Federation estimates that 34 percent of all in-store shoppers on Thanksgiving were ages 18 to 34. Plus, many workers have Thanksgiving off but not Black Friday.

Some retailers that closed on Thanksgiving Day last year saw significant spikes in online traffic. Outdoor retailer REI enjoyed a 10 percent jump on Thanksgiving Day and a 26 percent increase on Black Friday, according to data by digital analytics company SimilarWeb.

Online traffic doesn’t necessarily mean sales. There’s a difference between visiting a website and visiting a store. If you’re going to get dressed and drive to a store on Thanksgiving, chances are you are going to buy something.

Carol Spieckerman, president of Spieckerman Retail consulting firm, said closing on Thanksgiving sends a mixed message. Retailers have invested enormous resources into building an “omnichannel” model in which consumers can purchase anything they want at any time, whether in-store or online.

“What’s perilous is that retailers have been trying to create a seamless shopping experience,” Spieckerman said. “They are now breaking their promise.”