As the final figures for last Black Friday's and Cyber Monday's sales show positive gains, is this really proof that the US economy isn't as lumbering as the housing market and credit crunch would indicate?
With the price of fuel tremendously higher than anticipated last year, and with inflation starting to creep back into the picture as a result; and with the US housing market in a state of free-fall and the credit markets in a state of crisis, you'd think there shouldn't be a lot of frivolity, gaiety, and merriment in the holiday mood. As it turned out, though, retail spending both offline and online have risen nicely.
The initial analysis said this was because Americans had cash to burn after all, and that the impulse buying habit was alive and well. But a deeper read of last week's and last Monday's data show very different trends: More people shopped smarter, looking for better bargains, and spending less per person.
If you're an economist, you might not be having a lot of frivolity, gaiety, and merriment yourself right now. Because that data might be an indicator -- as it was last year and the year before -- that a big chunk of the holiday spending has already been done.
BetaNews spoke at length earlier this week with AR Communications Senior Vice President Carmi Levy, who follows both consumer and business technology trends. We asked Carmi first, is the data he's seeing from the weekend indicative more of a healthy economy, or a smarter shopper wary of a possibly negative economy?
CARMI LEVY, Senior Vice President, AR Communications: I think it's a little bit of both. It's hard to believe that the impact of the mortgage meltdown in the US, of the sub-prime crisis, isn't going to have some kind of impact on holiday season shopping patterns. So in some way, to a certain degree, at some point, we are going to see some examples -- maybe not across the board, but at least in some sectors -- of suppression of demand. People are possibly holding things a little closer to the vest because they don't feel quite as liquid this year, or as flush, as they might have in years past.
SCOTT FULTON, BetaNews: Well, I felt flush, but it's a different kind of flush.
CARMI LEVY: You're not as inclined to spend as much on Christmas gifts, or on other discretionary purchases when you are concerned about the value of big-ticket items like your home, when things like your interest rates might be creeping up, when your job might be in jeopardy because the economy is beginning to take a hit because of a weak US dollar and weaker fundamentals.
I believe at some point those broader issues in the general US economy will start to filter through to shopping patterns, both at holiday time as well as throughout the year. So we may be seeing some of that in these initial numbers that shoppers are possibly a little bit more reluctant to spend big dollars on things, and that they are taking their time to research a little bit more this year than they would have in the past, so that maybe as they get closer to December 25, they might score a bigger bargain than they would have looked for in years past.
SCOTT FULTON: Here's something I've never really understood: I guess it may be a presumption on somebody's part, either mine or the economists', but I tend to read for the last few years that whenever there's a prediction of lower sales for consumer electronics, it's that impulse sales are going to be down -- in other words, the kinds of sales that people look at and say, "That's it, I've gotta have it, I'm picking it up today."
Everything I tend to buy in the consumer electronics space myself is a discretionary purchase; in other words, I think about things radically before I'm going to spend forty to fifty dollars on something. I'm going to save every last dollar I can -- it's going to be the best brand, the better performance. And I don't know anyone else personally who is any different. So who are these impulse buyers who walk by and say, "Ah, hard drive! That's it, I'm gonna buy it?"
CARMI LEVY: It's funny, because my affinity group, so to speak, is very much like that. I am like that. I research every purchase, even down to a $30 USB drive, I will research it online and make sure it's the absolute right device for me, and then I will find the best possible price for it.
Part of the research Carmi does involves a certain type of snooping you may be guilty of yourself: going to department stores just to hear the conversations salespeople have with buyers. What he's learned there is an interesting trend -- perhaps just as much a psychological one as an economic one: Since notebook computers have broken through the $750 price barrier, a new class of buyer is susceptible to purchasing them for an altogether new and different set of reasons.
CARMI LEVY: On trips out to the Best Buy or Future Shop -- which is Canada's equivalent of Circuit City, big-box electronics stores -- I'll often just hang out in the aisles and I'll listen to people discuss potential purchases either among themselves or with salespeople, and I can assure you that the vast majority of individuals out there are largely buying based on impulse, or based on what they see as they walk by the shelf. In most cases, they've done precious little online research, and are simply going by either what a commissioned salesperson is pushing them towards, or based on what looks good to them at that moment.
Standing in stores -- this is something that has shocked me time and again, how little input and effort people put into even something as big-ticket as a laptop purchase. They'll just go with it because it looks good, because it looks sleek and sexy, not because the specs meet any kind of business or life need.
SCOTT FULTON: So the people you listen to are as likely to go for that 12 megapixel digital camera on the spur of the moment, as they would a 2 gigabyte HD DVD-based laptop.
CARMI LEVY: That's right, and they'll go for these things because they have a bag that fits it, because it's light enough for them, or because they think it'll look cool when they bring it into the office or when they go to the Starbucks and pull it out and connect to the Wi-Fi. Not necessarily because they even need such a device, especially as prices continue to settle.
The average transaction price for a laptop, for example, continues to come down, and is increasingly the only choice for consumers who buy computers; they don't even buy desktops to the same degree any more.
When a laptop was $2000, it was not an impulse buy. When a laptop is $500 or $600, it absolutely can be an impulse buy, and the price is just low enough that someone might buy it more as a fashion accessory than as a business tool.
SCOTT FULTON: So a laptop computer, then, if that's just as much an impulse buy as anything else, what then happens to the poor desktop computer? I don't know that you show it off as much. I don't know that it's a thing you bring your friends home and say, "Hey, I've got this HP Blackbird 002, isn't this really cool?"
CARMI LEVY: The lack of portability certainly limits your ability to show it off and to brag to friends. You obviously have to be become much more willing to have people in your home.
Next: The "laptop effect," and Wal-Mart's ability to respond