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Black Friday Sets Tone for Promotional Holiday

This week's shopping bonanza should include bigger sales than usual.
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SAN FRANCISCO -- While "Black Friday" isn't the make-or-break day for stores that it used to be, it will provide retailers a glimpse into their future.

So far, that future looks to be a highly promotional one.

Several companies have already offered bleak predictions for the holidays, cutting their guidance ahead of the busiest shopping season of the year following lackluster sales in September and October. Among the pessimists are


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J.C. Penney

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The term Black Friday is a throwback to the times when retailers relied on the day after Thanksgiving to get them out of the red. But with economic concerns hitting sales -- and the resulting promotions cutting into the bottom line -- it's going to take a lot of work for retailers to ring up big profits.

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Typically, Black Friday is used as a device by retailers to simply get people to shop. Malls open at 5 a.m. and sales are offered for only a short window, maybe until noon or 1 p.m., to create a sense of urgency.

The following week, the sales die off and merchandise returns to full price. Friedman Billings Ramsey analyst Adrienne Tennant says this is when everything becomes a game of chicken, with retailers and shoppers trying to see who flinches first.

Usually, it's the retailer -- and this year should be no different.

According to a survey by the International Council of Shopping Centers, customers are planning to start their holiday shopping later this year than in the last two years. They also expect to be more price conscious.

About 27% of those surveyed say they will spend less on gifts this holiday season. Of that, about 60% say they will buy less expensive gifts, with households with an income of between $25,000 and $35,000 being the most frugal.

Retailers are sensing this reluctance to spend. Even before Black Friday, many stores began slashing prices on merchandise, which now makes it difficult for them to reverse course during the holidays.

For instance, chains such as




Barnes & Noble

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, and Victoria's Secret and Bath & Body Works, both divisions of

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, held "friends and family" sales events to entice the first stream of customers into their stores before the holidays.

"It's good timing -- you get the traffic bump," Tennant says. "It's a nice little shot in the arm as you go into Black Friday."

Tack onto that


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aggressive pricing, and it would seem promotions are the only way to go. The discount chain behemoth started its holiday shopping season back in October, cutting prices 20% more than last year on 15,000 items.

Wal-Mart is also getting a head-start on Black Friday by offering online specials on Thanksgiving Day. On Black Friday itself, it will offer in-store specials on select items like digital cameras and toys from 5 a.m. to 11 a.m.

Marshal Cohen, an industry analyst with research firm NPD Group, says the last time he saw retailers be this promotional ahead of the holidays was in 2001, after the Sept. 11 terrorist attacks and the dot-com crash that brought down the economy.

He sees little reason to be hopeful about the holidays, noting a lack of appealing merchandise to drive foot traffic into stores.

"There's an absence of must-haves -- we haven't enticed the consumer," Cohen says. "What's going on out there other than


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iPhone that's gotten people excited? Nothing."

Cohen expects holiday sales to increase by only 2.5% to 3%, compared with the National Retail Federation's forecast for a 4% increase. As for Black Friday, he expects heavy promotions to be one of the only ways for retailers to unload their inventories.

"I'm calling it Gray Friday this year because it's not as robust," he says.

But while Black Friday will likely set the tone for the holiday season, it is not the heaviest sales volume day for retailers, points out Craig Johnson, president of research firm Customer Growth Partners. That comes later -- usually the last Saturday before Christmas.

"Black Friday is always important but people tend to make it over-important," Johnson says.

Likewise, Cyber Monday, or the Monday after Thanksgiving, is not the biggest online shopping day despite all the hype surrounding it. However, the National Retail Federation expects the Internet to claim 30.2% of holiday sales this year, up from 28.9% last year, and many retailers will offer one-day promotions and special offers on Cyber Monday to get things started.

Johnson is taking an optimistic view of the holidays. He sees a 5% to 5.4% increase in holiday sales this year, predicting that steady employment and income growth will keep customers shopping.

"As long as they have jobs, they have income," Johnson says. "And as long as they have income, they buy stuff."