After spending several years rushing to open their doors on Thanksgiving Day, retailers have been hit with a dose of reality: It may not be worth it.
Office Depot, Mall of America and electronics store HHGregg have all announced they will be closed on Thanksgiving. Other retailers like Sears will open fewer stores, and of the locations that do open, many will have shorter hours.
The companies give different reasons for the shift – employees should be able to spend time with family, for one – but the overriding message is clear: For some retailers, opening on Thanksgiving is too much of a headache.
“Those who have opened on Thanksgiving Day have come to recognize that you don’t need to open that early to drive the kind of sales you need,” said Wendy Liebmann, chief executive of the consulting firm WSL Strategic Retail.
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The decision to remain closed is the latest evolution in the retail industry’s scramble to figure out how to compete in an increasingly complicated holiday shopping season, which seems to start earlier every year.
The day after Thanksgiving, often called Black Friday, traditionally indicated the beginning of the annual promotional frenzy, but that idea became quaint in recent years. In the post-recession age of Amazon, people want the deals they have grown accustomed to finding, especially online, whenever they want them, and the season began expanding.
“Consumers now know that they don’t have to line up at 5 o’clock in the morning,” said Joel Bines, a co-head of the retail arm of AlixPartners, an advisory firm.
That pressure to cut prices deeper and earlier drove many more retailers to begin opening on Thanksgiving about five years ago. And many are still staying open this year, including traditional department stores like Kohl’s and J.C. Penney. Macy’s, the country’s largest department store, will be open even in shopping centers that will be closed, like Mall of America.
Opening on Thanksgiving makes sense for these and other retailers that rely heavily on promotions. Stores like Wal-Mart and Target, which will both open this year, still offer the kinds of door-buster sales on televisions and electronics that rally customers to line up early, even in the cold, Bines said.
Yet overall, the number of people shopping on Thanksgiving Day has been declining. Last year, 34.6 million adults shopped on Thanksgiving, down from 43.1 million in 2014 and 44.8 million in 2013, according to annual surveys from the National Retail Federation, an industry trade group, and Prosper Insights & Analytics.
In 2014, total sales for the Thanksgiving weekend fell 11 percent from the previous year, according to the most recent year-over-year comparison from the retail federation.
“That is one of the reasons why we took the initiative of giving our associates Thanksgiving off, because we have seen that activity go down significantly on that day over the last couple of years,” Robert Riesbeck, HHGregg’s chief executive, told analysts during a recent conference call.
Part of the challenge for retailers is figuring out whether Thanksgiving generates more overall sales, or just takes shoppers, and therefore sales, away from Black Friday. About 18 percent of people who shopped on Thanksgiving did not shop the day after, yet the earlier shoppers generated about 30 percent of all sales during the two-day periods in 2014 and 2015, according to an analysis from the research firm NPD Group.
Retailers who generate more sales can expect to earn a profit margin of 16 percent for the weekend, according to AlixPartners. But retailers that just take sales away from Black Friday by opening on Thanksgiving may generate only 3 percent.
Retailers are now rethinking whether the potential benefits outweigh other headaches, like the negative publicity that comes with forcing employees to work on a national holiday.
Initially, stores that opened on Thanksgiving tried to use the announcement as a way to show consumers that their needs were being catered to. But closing on Thanksgiving is also a way for companies to send the message that they are socially responsible, which could help endear them to increasingly important millennial consumer.
In a separate announcement in October, for example, HHGregg said that it had chosen to close because of its core “family-first” values, and that it believed employees should be at home. Office Depot, too, said that its decision to close came after weighing the “business and personal dynamics.” A spokesman for Sears, Brian Hanover, said the company had made a similar evaluation.
“There’s been a lot of discussion and pushback both ways,” Liebmann, of WSL Strategic Retail, said.
But there are also logistical issues, like keeping shelves fully stocked through Black Friday.
“There’s a number of things that can make it challenging to have two huge days, one right after the other,” said Joel Alden, a partner in the retail practice of A.T. Kearney, a consulting firm. “You can’t move inventory to the store when you have that much traffic in it.”
Retailers also want to use one of the busiest times of years to hook new customers with special promotions and merchandise. But making a bad impression – tired staff, poorly stocked shelves – can have the opposite effect.
“If you do a lousy job over the Thanksgiving period, it may be a while before those customers come back and visit you again,” Alden said.