Leaving the door open to sales
Just as they did at the start of the season, more of the nation’s stores are pulling marathon hours in the holiday season’s finale. But with smaller crowds at 4 a.m. than at 4 p.m., are the extended hours worth it?
Experts say yes, noting that the additional labor costs are minimal compared with the goodwill that stores enjoy by offering a convenience to time-starved shoppers, especially when sales are already dismal.
“It makes sense, and cents, especially this year,” Stifel Nicolaus analyst Richard Jaffe said.
The all-nighters, which have been gaining ground for three years, show how nervous retailers are trying to grab last-minute shoppers in the final hours of a season that’s expected to be bleak.
The Toys R Us store in Manhattan’s Times Square on Friday began keeping its doors open around the clock and will log 134 hours straight, through Christmas Eve. Macy’s, which last year had only a few locations in the New York metropolitan area open 24-7, now has 13 stores in areas like Chicago, Washington and Detroit that are pulling all-nighters in the final days before Christmas.
Marshal Cohen, chief industry analyst at market research firm NPD Group, believes retailers have no choice, because if “you don’t do it, you are giving up your share to someone else.”
Besides the bleak economy, retailers this year faced a holiday shopping season with five fewer days than last year. Meanwhile, a major winter storm that cut across the country stalled sales for the critical last weekend before Christmas. ShopperTrak RCT Corp. estimates that the final weekend accounted for 11.5% of holiday sales last year. Jaffe estimated that 35% of the retail market was affected by mall closings or delayed openings this year.
“Stores are hoping they will pick up sales that they might not have had,” he said.
Many stores open 24 hours during the holiday season already have workers in overnight stocking the shelves and cleaning -- so opening to shoppers requires only minimal sales help, said Joel Bines, director at consulting group AlixPartners. Electricity costs are not a big issue, as stores are paying off-peak rates.
“The big question is whether you actually increase customer traffic and sales, or are you spreading it out,” Bines said. He believes that in a normal season, stores are just spreading out the sales.
Ken Perkins, president of research company RetailMetrics, noted that the incremental labor costs of expanded hours aren’t going to hurt profit margins as significantly as the dramatic markdowns are. He noted that it’s better to shoulder some of the extra costs to sell more merchandise before Christmas, because afterward stores have to mark down the items an additional 10% to 20% -- which will further depress fourth-quarter profits.
Stores are expected to post an 18.8% decline in fourth-quarter profits, for the seventh consecutive period of profit declines, Perkins said. He expects profits to keep tumbling into the first quarter, with predictions so far of a 10.4% drop.
For some merchants, the jury is still out. Toys R Us spokeswoman Kathleen Waugh said the company decided to keep the flagship store in Manhattan open because it was already receiving shipments all night and is in the “middle of all-night activity” in Times Square.
“It was an easy decision,” she said.
