Analysis: Is Black Friday truly good for an ailing US economy?

Well, suppose these [Black Friday] numbers actually turn out to be as good as they appear to be. There was some more traffic, there was more discretionary buying but the decisions were made, and consumer electronics benefitted from this. What happens to inventories then if sales were higher than expected? Doesn't this create a pinch, where late in the season there's less availability? Doesn't that create a drag on sales, and doesn't that reduce the incentive for those last-minute discounts?

CARMI LEVY, Senior Vice President, AR Communications: Potentially, it could. If as a retailer, if that is the game that you decide to play, that you decide to go lean on inventory as a way of minimizing risk of exposure to a possibly slow holiday season, then you had better hope that you have efficiencies in your supply chain and that you can leverage your relationships with your vendors to accelerate deliveries if demand is larger than initially forecast.

So this is where those retailers with more efficient supply chains and better supply chain management processes and relationships will have that flexibility, that agility to roll with the punches if demand is greater than forecast. I wouldn't put it past the Wal-Marts of the world; certainly a company like Wal-Mart has the sophisticated tools to project demand and respond appropriately to it if reality diverges significantly from what was forecast.

Certainly I would expect a company like Wal-Mart to have the influence within its supply chain to be able to roll with the punches as needed. But smaller retailers, some of them might be gambling and some of them might lose, and that is a risk they run every year. In many respects, there's really no way to tell how fickle consumers will be until you finally add up the holiday season receipts after Boxing Day. So in many respects, you make an educated guess and you hold your breath and you hope for the best.

SCOTT FULTON:Last year, we had a pretty decent Black Friday, and a very good Cyber Monday, and then right after the first week of December, sales plummeted like a stone. Everybody spent what they were going to spend, and then it was the rest of the holiday season just trying to get back up to steam. We never saw those same numbers again.

If that's the case again this year, what good is it really, if you're a retailer, to throw all your hopes towards one day of great sales, if it costs you the momentum toward the end?

CARMI LEVY: Really, there's no good that comes of it. In other words, everyone recognizes that it is, in fact, damaging to your long-term viability throughout the entire holiday season, and it sets you up for a holiday season that might not be as lucrative as would otherwise be the case. But everybody's doing it, so they don't have a choice.

If every vendor is actively investing in Black Friday and Cyber Monday related marketing efforts, and is gearing up for those two days, and putting all of their eggs in those baskets, even if you as a retailer aren't pleased with that, you've got to go with the flow or risk getting left behind, because that's where consumers are going to be. They'll be there in your store on Friday, and they'll be online on Monday, and if you miss them on that day, you may not get them back for the rest of the holiday season. So you've got to dive in, even if you're not happy about it.

SCOTT FULTON: You talked about retailers like Wal-Mart having the agility to sense changes in the market, and respond accordingly; if their inventories are low, then maybe they can make near-term adjustments. Maybe they might not be as agile as, say, an Amazon, which deals on a full warehouse basis, but they can respond at least on a week-by-week-by-week basis.

CARMI LEVY: Sure, if you look at how they manage their stores, Wal-Mart in 2007 accelerated the adoption of RFID across its stores, recognizing that they needed to be able to manage inventories on a more micro level than they had been previously. They'd been getting beaten up over the last 18 months because they just hadn't been as able to control their supply chain as they traditionally had. So they've been gradually retrofitting all their stores with technology, and they've accelerated the rate at which they've retrofitted their stores with technology to literally manage on a shelf-by-shelf basis, and be able to produce reports on what's moving, what isn't, at what rates, and to give them much greater insight as to what's selling and what is not, and that allows them to adjust accordingly.

SCOTT FULTON: But what if you're a store like Circuit City, which last March pretty much dumped a lot of its infrastructure and its mid-level workers, and then hired back some really low-end workers to make up for that...but in so doing sacrificed a lot of its in-store controls, and probably is far less agile. The early numbers for Circuit City this morning say their sales could actually be higher, and they're going to have a good year. Well, if they don't have stuff in the warehouse, it's going to be a few weeks before they're able to respond to this. What happens to them?

CARMI LEVY: It'll be much longer before they know that they even have an issue. If they're doing better, it's not because of anything they've done. It's because it's the luck of the draw. The broad-based inventory choices that they made months ago just happen to be more or less matching with current consumer demand.

But if those get out of whack, they will be in much less of a position now, because of the infrastructure and HR changes that they made earlier this year, to effectively respond to them, so they are much more at risk of being out-of-sync with market trends because of the choices that they've made in terms of how they've managed their stores -- how they equip them technologically, and how they hire individuals to run them. More luck of the draw than anything else, and they'd better keep their fingers crossed because, over time at some point, the tide will turn and they may be on the wrong side of it at that point.