A Black Friday like no other: How the economy is changing Black Friday

The economic downturn is redefining "Black Friday." It might be bad news for merchants, but it's good news for shoppers, at least in the short term. Here are the ways that the economy is going to influence the holiday season.

This information is put together from news and analyst reports, dealnews' proprietary software analytics tools, and insights from the members of the dealnews editorial team, who have over 54 combined years of online deal-hunting experience dating back to 1997.

Black Friday Is No Longer a Day, It's a Season

When most people think of Black Friday, they think of the day after Thanksgiving. But the fact is, over the past several years, the idea of "Black Friday" has been expanding.

In previous years, Black Friday had become a two-day event, since many Black Friday sales are available online on Thanksgiving Day. Last year, however, Wal-Mart upped the ante with its "Secret Sale" promotion (pictured). That sale started exactly three weeks before Black Friday. It featured a high-definition DVD player (HD-DVD) for $99, Acer laptop for $348, and 50" plasma TV for $999, prices that are still aggressive a year later. Not surprisingly, Wal-Mart received millions of dollars worth of free PR for its "Secret Sale" (a misnomer if ever there was one). Importantly, Best Buy beat Wal-Mart's price on the HD-DVD player that day, showing a willingness to compete with its own loss leader and getting its own free PR.

Wal-Mart's goal was to extend the halo from Black Friday into multiple high-buzz sales events throughout November. You're likely to see the same game plan this year from Wal-Mart, which enters this holiday season much healthier than its competitors. And where Wal-Mart goes, Best Buy, Target, and the others must follow. It's a live-or-die holiday season for many stores this year. Retailers can't ignore the power of huge, "Black Friday"-like sales events on the run up to Thanksgiving.

And if a retailer is thinking about not competing, it had better think twice. Four years ago, Wal-Mart skipped Black Friday entirely, with no major ad push and no "doorbusters." The result was the worst after-Thanksgiving sales weekend for Wal-Mart in years. Retailers who don't want to compete with Wal-Mart by expanding Black Friday into a month-long event run the risk of having bad sales for an entire month, a death knell for most.

The Credit Crisis

The credit crisis is affecting retailers and will impact Black Friday.

Most retailers have to borrow money to acquire inventory, which they must then sell to pay off their debt (and keep the rest for themselves). However, banks have tightened their criteria for lending. As the credit markets have dried up, retailers are finding it harder to borrow from banks, especially since banks know that American consumers are spending less on non-essentials. For most retailers, costs to borrow are rising, costs that could destabilize a staggering retailer. Bankruptcy is no solution, since bankrupt retailers are starved of financing while they attempt to reorganize.

For the first time ever, there's a real possibility that some retailers will have to renege on Black Friday sales because they'll be insolvent by the time Black Friday rolls around.


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