The Day After

The day after Christmas means, for many people, huge savings. For retailers, it means big sales, too, but they are sad sales, for the most part, a reflection of poor decisions and the impact of online retailing.

There’s no big name for the after-Christmas sale, like there is for Black Friday, or like the Brits call December 26, “Boxing Day.” Some retailers call it “After-Holiday sale” but whatever you call it or don’t, it’s a necessary evil. Retailers bring in a huge amount of merchandise for the holidays, much of it holiday-themed, in hopes to sell a huge portion of it and make enough money to offset their losses the rest of the year. That’s what Black Friday originally meant (and still means for many retailers) – all year, retailers borrow money to buy the merchandise they sell throughout the year. On the day after Thanksgiving, when the huge rush to purchase holiday gifts began, retailers would make enough money to pay off their debts and their books would go from being in the red to being in the black.

Anyway, retailers buy so much merchandise for the holidays that they hope to sell to you. In the old days, retailers wanted to sell through merchandise at full price before the holidays. It was disappointing to buy too much, because you had to sell anything you had left at a deep discount, and you didn’t make as much of a profit on it. Or you had to carry it forward, and that causes problems because a) consumers didn’t have much money left after the holidays; and b) it prevents you from bringing in more current merchandise. A retail space is like a small New York apartment – it’s a zero-sum game. If your apartment is full of, for example, bicycles or scuba gear, that someone hasn’t used in years, you don’t have space for the things that are important in your life right now, such as wine or books, more books, more books, MORE BOOKS. Oh, sorry, what was I saying… Ah, yes. If your retail space is full of huge coffee table books about dogs, or DVDs of It’s a Wonderful Life, or ugly holiday sweaters, or peppermint-scented candles, red velvet anything, or all those things we buy when we’re searching for that perfectly holiday gift – if your store is full of these things, you don’t have room for bathing suits for spring break, or Valentine’s gifts, or Easter dresses, or all the things people will want to buy once their bank accounts recover from holiday splurging.

And, in addition to the space that is tied up with holiday merchandise, is the money that is tied up in this merchandise. Let’s say you invest in holiday table-runners, you buy them at $3 per piece and – before Christmas – sell them at $12 per piece (making up numbers here, not intended to reflect reality). After Christmas, you won’t be able to sell them at $12 per piece. You could hold onto them and try to sell through them next Christmas but if you’re stuck with a lot of them, they’re probably a dud that won’t sell next year anyway (and, if you’re talking about clothing or coffee table books, they probably won’t be in style next year, and they definitely won’t sell); and if you’ve only got a couple left, they won’t make a powerful merchandising statement (when you shop, do you buy the last something? Unless it’s a Tickle-Me Elmo or something else whose value has been artificially inflated to create demand, my guess is No. Last items look unwanted.). If you can sell them after-holiday at $6 per piece, you don’t make the $9 that you planned to make, but you can make $3 – and that’s $3 more than you would make if you held onto the merchandise.

So, now that the holiday shopping season has shortened for bricks and mortar – you did realize that happened, right? It used to be a generally upward curve in sales from Black Friday through Christmas, with smaller peaks each weekend, and continuing through a huge peak on Christmas Eve with every father in the country rushing out to buy something, anything, just give me something to give the family as Christmas gifts. Now you get a (slightly lower, and this year even lower) peak on Black Friday, and then nothing for weeks, well maybe a gentle curve, until online shipping ends, then a sudden increase in bricks and mortar sales, that trails off around noon on Christmas Eve as everyone rushes to get wherever they need to be on Christmas Day (and lazy dads either get someone else to buy the gifts; pick up gift cards from the kiosk at a store on the way home; or, for older kids, just give cash).

What that means is that there is a lot more merchandise left over, so much more that many retailers plan obsolescence into their sales strategy. They target shoppers who received gift cards for Christmas and know that their $25 will go a lot further the week after Christmas than it will in March or July. They negotiate deals with manufacturers that allow them to buy more up front with the plan of selling more in the 2 or 3 weeks after Christmas. They ship dud merchandise into stores from their warehouses to inflate the amount of sale merchandise in the stores. As an increasing amount of merchandise goes to sale – exceptions being things like Lego, which doesn’t allow discount of “good-line” (non-obsolete) merchandise; and clothing with silver sequins which is de rigueur for New Year’s Eve – the amount of non-sale display space becomes smaller, and the merchants fight for it. Some merchants champion seizing the space for Valentine’s Day displays; others fight to put up promotions targeting gift card holders who might be tempted to add to their gift card’s value to splurge on something absolutely irresistible.

For people who work in the stores, this increasing amount of sale merchandise means a shorter holiday. Maybe you can do a little pre-merchandising Christmas Eve, once the last-minute shoppers trickle off, you can shift some merchandise around and get it ready. But most retailers are coming in at 3 or 4 or 5 a.m. on December 26, racing about trying to find all the duds and move them to the clearance tables, remerchandising the remaining space with heart-shaped anything and gift-card temptations; changing signs, retagging or stickering merchandise. It’s also a peak day for Retail IT HelpDesks – the people the stores call when things don’t ring up at the right price. For over 10 years, I hosted an 11 a.m. call with close to 100 people – mostly home office people, buyers, merchants, IT folks, with a handful of field leaders – to review and resolve any pricing issues, followed by an immediate email to the stores with an update. When the call started, it was painful triage, over an hour long. In my last year, we had moved so much planning ahead of time and buttoned-down the merchants’ process so tightly that the call lasted less than 15 minutes and the email basically said, “Nothing to see here.”

And, unfortunately, nothing to see in the sales either. For a while, it looked like shopping patterns would shift from before-Christmas to after-Christmas. Recently those fears have died down a little, but as the economy softens, we’ll have to watch what happens.

So there you are, a little wiser to what’s happening behind the scenes so that you can shop at a discount on December 26.

Enjoy!

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