Wal-Mart (WMT) Rolls the Dice on an Unusual Black Friday Strategy

Posted by jbrumley on November 17, 2015 1:15 PM

Wal-Mart Stores (WMT) Gambles On Changing Its Black Friday Strategy

Wal-Mart Stores (WMT) isn't interested in going overboard to win the Black Friday war this year, and judging from the stock's response to the announcement last week, investors are none too happy about it. And, given a couple of quarters of lackluster earnings and the subsequent 32% year-to-date pullback from WMT shares, one would think Wal-Mart wouldn't even take a chance on further alienating its current shareholders.

As it turns out, though, there may be a brilliant method to the madness.

Black Friday deals started out as a clever way to draw customers into stores first, as even before the annual event become an art and a science, retailers like Wal-Mart Stores knew that most shoppers spent the bulk of their holiday shopping budget in the first store they visited. The battle became so fierce that some retailers began to offer loss-leaders as so-called "doorbusters" just to lure spenders in as early as possible.

It didn't take long for customers to also learn the art and the science of Black Friday, however, and recently shoppers -- with plenty of accessible choices -- adopted "doorbusters or bust" attitude, walking out of a store of the too-good-to-be-true deal was no longer available.

In other words, Black Friday has become a very expensive affair for many stores, with little to no bottom line left to tap into by playing the game.

So, this year, Wal-Mart isn't playing the game to any over-the-top extent its competitors surely are. It's going to offer a total of only 32 doorbuster-type deals for the entire Black Friday weekend, with in-store sales beginning on Thursday, Thanksgiving day, at 6:00 pm for most stores. All its touted deals will begin simultaneously, and whenever they're gone, they're gone. To accommodate as many shoppers as possible, the company says it's stocking more of those specials than it normally might, rather than put the focus on a whole new batch of good every day of the key shopping weekend.

In other words, it's doing everything its competitors aren't, and not doing much its competitors are.

Superficially, it's a big risk for the increasingly-disliked retailers (XRT). But, as was noted, there's something subtly genius about the gamble.

Above all else, Wal-Mart seems to be banking on the fact that Black Friday has become so overwhelming for consumers that it's become self-defeating. Last year's Black Friday weekend retail spending was down more than 11% on a year-over-year basis. Consumers weren't keeping their purse strings drawn tightly though. They were just spending that money after, or even before , Black Friday weekend. In all of November of last year, retail spending grew more than 5%, as savvy consumers reconfigured their shopping schedule to avoid the unruly crowds.

Only time will tell if the gambit pays off. If it doesn't, Wal-Mart’s chief merchandising officer Steve Bratspies may soon adding the prefix "ex" to the front of his title. If it does work though, and Wal-Mart manages to offset that lost Black Friday business in December, it could prove to be a much-needed victory for the struggling discount chain.

Either way, it's an experiment worth watching.

WMT Long-Term Weekly Chart
wmt wk 111715

 

BECOME A BIG TRENDS INSIDER! IT’S FREE!