Media "Vapors" Over Bogus Bellwether Economic News
The business media seems to once again be suffering from a near- critical case of the "vapors" - this time over the warning signs projected by early-return Christmas holiday sales. Their apparent need to predict the near-term future has all but outweighed their ability to interpret the real news available to them.
This just-completed first-of-the-season holiday shopping weekend has been a classic example of this media compulsion. First, I heard an ebullient holiday sales prediction based on an estimated $8 billion in one-day retail sales on "Black Friday" (an ill-named date if there ever was one). Then, just a day later, I read in The Financial Times that doom was the order of the day.
Because Wal-Mart's sales growth figures were relatively flat. Not down - just not up as high as Wal-Mart's investors might have wanted. That was all it took for even the most respected business media to begin questioning not only the nation's holiday sales, but the country's entire multi-year economic recovery.'
When Wal-Mart's projected November/December sales were reported as relatively flat, all of the other "positive" trends just seemed to go up in smoke. For instance, the National Retail Federation confidently projects an industry-wide 4.5 percent growth - to a phenomenal $220 billion in non-Internet retail - for the entire 2004 holiday shopping period. Visa USA reported a massive 15.5 percent spike in Visa card sales, up to $4.1 billion. Internet industry analysts are tracking - and reporting - an incredible surge in Internet sales, up by more than 20 percent from last year. Getting more focused on the "right now," Shoppertrak reported that "Black Friday" sales grew 10.8 percent from a year ago, to a record $8 billion in retail industry-wide first-day sales.
However, these positive reports seem to have all been ignored in the media rush to make this venerable bellwether - Wal-Mart - "dictate" not only Christmas holiday sales, but to make it a marker predicting the fate of the entire ongoing economic recovery. It seems that the business media has gone overboard - again - in trying to predict the future while ignoring the present.
In this, the business media's experts seem to be following the recent pattern of the political media, which was seemingly desperate to predict the outcome of the US presidential election - even just a few hours before the polls closed. The political media used such esoteric bellwethers as the Washington Redskins loss the last home-game Sunday before the election, the previous infallibility of the Zogby last-day poll, the apparent relationship between Presidential job-approval (as defined by Gallup)and the actual vote - and most importantly, the results of exit polls, polls that were never intended to predict outcomes (but only to explain why different demographic groups voted as they did), to predict the final vote tally.
I'm not sure why it is so important for the big-foot media to use unrelated "markers" to predict the future. However, it is nonetheless clear that at least this bellwether's predictive quality IS important - vitally important - to the business media, in the way that Ben Franklin's "Poor Richard's Almanac" used wooly caterpillars to reliably predict the severity of an upcoming winter.
But when it comes to predicting our economic future, Wal-Mart is no longer a reliable wooly caterpillar.
Here's what I think is really happening.
The U.S. national economy - and America's retail economy - both continue to be strong. The overall recovery continues to move forward in solid, if not spectacular, fashion. As a result, there's a new business bottom line - Wal-Mart is no longer a reliable bellwether of Christmas Holiday sales success. This is true for a variety of very good reasons.
First, Yogi Berra's observation about crowded restaurants apparently now applies equally well to Wal-Mart: "Nobody goes there anymore because it's so crowded." Last year, Wal-Mart scored another record year - just as the entire Christmas-season retail sales scored a record year, up roughly 4.5 percent (estimates of growth range from 4.0 to 5.1 percent for last year's holiday shopping season, depending on how you define the "season") over the previous year, as well as scoring their highest sales level in history. Which meant that last year, Wal-Mart did better than ever before - and perhaps, just perhaps - Wal-Mart had maxed out on their ability to pack in people who are tolerant of both huge crowds and excessive waits at cash registers. This year, Wal-Mart is as filled-to-the-rafters with customers as they were last year, but maybe (again, just maybe) they've reached a point of diminishing returns. Maybe their discounts, range of goods and "convenience" have ceased to outweigh the crowds in the aisles and the crowds in front of the cash registers. I do know this - crowding and congestion has gotten so bad at Wal-Mart that radio talk show programs normally devoted to politics or current events have hosted call-in segments on how to "beat the system" at Wal-Mart. Suggestions have included using the registers in the Jewelry or Sporting Goods departments, which have shorter lines.
Next, whenever a company gets as big and successful and powerful as Wal-Mart has become, competition moves in. It has surely done so this year, especially because, at least for the start of the 2004 holiday season, Wal-Mart seems to have decided to coast on its reputation rather than aggressively compete for business. In doing so, they seem to be forgetting that they originally succeeded against the nation's established retailers by out-competing not only the local mom-and-pop stores, but also by overwhelming an early generation of mega-retailers. Instead, this season, Wal-Mart has chosen to eschew deep-discounts - at least at the start - and that opened the door for others to capture customers and steal market-share. The result? On "Black Friday," those more-competitive retailers succeeded in pulling away sales from Wal-Mart - seasonal sales that, in this zero-sum market, that mega-retailer will never be able to recapture. On a day when sales set records, Wal-Mart was busy, but not busier than they were on the same day in 2003. Logically, those customers had to be spending their holiday dollars somewhere else.
Here's how the competition did it. Super-Target now competes with the Wal-Mart super-stores, and their ads proclaiming variety and deep discounts are everywhere. K-Mart just merged with Sears, and now they're both playing hardball. K-Mart was open on Thanksgiving, stealing start-of-the-holiday "Black Friday" sales - and market share - from Wal-Mart by creating a new shopping day. Then Sears opened at 5:30 a.m. on "Black Friday" - and offered huge deep-discount sales running only from 5:30 to 11:00 a.m. - again effectively "stealing" market share and sales from Wal-Mart.
In addition to playing the new-store-hours game, all the competitors - K-Mart, Target, Sears, as well as J.C. Penney, Best Buy, Circuit City and a host of others - have gone out of their way to offer huge and impressive deep-discounts. K-Mart, for instance. had a 50-percent-off sale right before Thanksgiving. Sears offered discounts up to 50% - and their pre-dawn sale on "Black Friday" offered an additional 10 percent discount. That doesn't even begin to cover the advertising, promotion and deep-discounting efforts of America's shopping malls, all designed to attract shoppers to their welcoming womb - and since Wal-Mart isn't in these malls, they're all working to steal shoppers and market share away from Wal-Mart.
In the face of that competition, Wal-Mart offered a relatively few "targeted" discounts (the $19.95 DVD player was indeed impressive) and no special store hours. Even without the extra competitive oomph, they held their own - but, unlike their competitors, they failed to capture their share of the market's 10% same-day growth over last year.
Finally, the retail Internet is booming as never before. Saturday, FoxNews aired a prediction that the Internet will really boom this holiday season, and AP published a similar report: "In the online world, holiday sales, excluding travel and auction sites, are expected to increase 23 to 26 percent to $15.1 billion, from $12.3 billion a year ago, according to comScore Networks Inc., an Internet research firm." Every dollar spent on Internet gift-shopping takes that dollar away from Wal-Mart (and other bricks-and-mortar retailers), yet retail analysts predict yet another banner year for these retailers, and even without the competitive spirit shown by other retailers, Wal-Mart is still predicting modest growth.
All of which suggests that the economy is healthy, that this holiday retail sales season will be better than ever before - and, perhaps just as important (at least to the business media) that Wal-Mart is no longer a reliable bellwether for holiday sales (or the economy as a whole). Which means that reporters and analysts will have to once again look at a variety of different information sources for specific trend-indicating data points - then think through what those data points, taken together, actually mean.
And one final note. "Black Friday," although it evokes memories of Wall Street's "Black Monday (1987)" and "Black Thursday (1929)" crashes, actually refers to the day that retailers "enter the black" - begin making a profit for the year - because of the huge impact of holiday sales. That's got to be the dumbest media buzz-name for a memorable day that I've ever heard - but from now on, when you hear "Black Friday," think of "in the black" instead of "massive market crash."
About Ned Barnett:
Ned Barnett, the owner of Barnett Marketing Communications (http://www.barnettmarcom.com), is a 32-year veteran of high-stakes crisis-management public relations, and is a frequent “source” for print and broadcast journalists. Barnett has advised many corporate and personal clients on effective crisis relations – often stopping a crisis in its tracks, even before it gets started.
As a political consultant and speechwriter, Barnett has worked for candidates and officials from both parties, as well as for public interest advocacy groups in areas involving the economy, the environment and healthcare. As a historian, Barnett is widely published in military history magazines, and has appeared a number of times on the History Channel, discussing military technology.
Barnett has taught PR at two state universities, and has written nine published books on public relations, marketing and advertising. He’s earned PRSA’s coveted Silver Anvil, two ADDYs and four consecutive MacEacherns; in 1978, he was the youngest (to that time) person to earn accreditation from PRSA, and in 1984, he became the first person to earn a Fellowship in PR from the American Hospital Association. But mostly, Barnett provides PR counsel to a range of corporations, authors and advocacy groups.
Barnett Marketing Communications