Why Black Friday is absolutely crucial for struggling retailers

Why Black Friday is absolutely crucial for struggling retailers
Copyright 2019 CNN
Companies like Macy's and Kohl's, which have recently struggled, aren't likely to go the way of Toys "R" Us, but the next few weeks could be "make or break" for their current turnaround strategies.

This year, Black Friday is more than just the starting gun for the all-important holiday shopping season (or the day you elbow your neighbor out of the way to score a TV). For retail’s struggling players, shopping’s mega-day is crucial.

Remember: In September 2017, Toys “R” Us filed for bankruptcy in hopes of turning around its struggling business. But terrible holiday sales left it on life support. The company said it would close all its US stores three months later.

There are six fewer shopping days between Thanksgiving and Christmas on the calendar than last year. But there’s no other reason stores should stutter. As my CNN Business colleague Nathaniel Meyersohn points out: Consumer confidence remains high, and low unemployment should buttress spending.

The National Retail Federation estimates retail sales in November and December will grow between 3.8% and 4.2% compared with a year ago.

“We’re in a very strong consumer environment,” Cowen analyst Oliver Chen told me. “If you’re having difficulties, what does it mean for the future?”

Companies like Macy’s and Kohl’s, which have recently struggled, aren’t likely to go the way of Toys “R” Us, Chen notes. Both have healthy cash flow and aren’t financing their businesses with too much debt. But the next few weeks could be “make or break” for their current turnaround strategies, he said.

Watch this space: If Macy’s, which recently lowered its expectations for the holidays, underperforms, it could accelerate store closures, according to Chen.

Those who can afford extra investment, meanwhile, may pull further ahead of the pack. Take Walmart, which has started to offer free next-day delivery on orders over $35 for more than 200,000 items. It’s also pledged to staff up stores with extra workers. Some will be outfitted with mobile checkout scanners to ring up customers on the spot, helping them bypass lines. Target said it’s increasing its holiday payroll by $50 million.

Target and Walmart’s commitment to curbside pickup, plus their easy-to-use mobile apps, will also provide an advantage, Chen said.

Of course, looming over all these players is Amazon. The company still beats Walmart and Target on average delivery speed by a day (two days vs. three days), according to new research from Bank of America Merrill Lynch. Amazon also offers lower prices on a sample basket of holiday shopping items that includes LEGO toys, a 23andMe DNA test and a Playstation 4 Pro. Amazon has the greatest number of items available, too.