Black Friday Will Separate Retail's Strong From Its Weak

The annual retail bacchanal known as the Black Friday to Cyber Monday weekend is upon us again, and many big chains have reason to be fearful.

The National Retail Federation expects some 165 million people to hit stores or shop online during the five days between Thanksgiving and next Monday, according to a survey with Prosper Insights & Analytics.

The NRF expects a strong November and December period, forecasting retail sales to be up about 4%. Shopify, a tech company that supports the e-commerce sites of brands like Allbirds, expects the average American shopper to spend $550 this weekend.

The season has gotten off to a solid start, thanks to many retailers starting deals earlier than ever, judging by preliminary online results: in the first two weeks of November, online sales rose 17.5%, according to Adobe Analytics.

But if retailers are getting aggressive earlier despite a strong consumer spending environment, it’s because the retail sector has largely been very promotional even before the holiday season and many big chains, particularly department stores coming off of a string of weak quarters this year, can’t afford to lose any more ground.

“The holiday season tends to exacerbate the highs and lows, and if you’ve been suffering, it’s hard to imagine you’ll turn things around during the holiday season,” Matt Hamory, a managing director at consulting firm AlixPartners, tells Fortune.

Consumers are in the mood to spend this year but retailers won’t benefit equally.

An early start

There is little doubt that deals are being dangled in front of shoppers earlier and earlier each year and 2019 hasn’t been an exception: Adobe for example found that computers and televisions were offered on Veteran’s Day (Nov. 11) this year at discounts not typically seen until the eve of Black Friday.

Walmart jumped into Black Friday-style deals in October. Target and Amazon also started their deals earlier this year. Kohl’s, which eked out a tiny sales increase last quarter (a 0.4% increase, won only by discounting heavily), is offering daily deals for the whole season, the first time it is trying that tactic.

The result is the continuation of a years-long dilution of the importance of Black Friday itself, even though the weekend overall still brings throngs to malls and remains the biggest shopping period of the year. (The single biggest day is the Saturday right before Christmas.)

What’s more, some data suggest that the companies that have been doing well this year, notably Walmart, Target, Amazon, and Best Buy, continue to enjoy strong momentum as they near Black Friday, while others that have reported lackluster numbers look destined for a soft holiday season.

Edison Trends, a data firm that analyses online transactions, found Walmart’s online sales rose 51% in the first half of November, while at Target they were up 47%, showing those chains were among retail’s best performers this year, and continue to counter Amazon well. Meanwhile, a struggling J.C. Penney was down 19%.

As for Amazon, it should once again dominate online spending this season: Bain & Co. expects the company to win 42% of all e-commerce. Nearly half of all online shopping searches start on Amazon and the e-tailer aggressively matches rivals’ prices.

Still, brick-and-mortar retailers that give shoppers a reason to come to stores will likely do well. Target, looking to win a bigger share of what’s expected to be a booming toy market this year, boasts new Disney shops at a few dozen of its stores, and has redone many of its front-of-the-store areas to include inexpensive but fun gifts.

Online, Target should also get a boost online now that its website gets a redirect from the Toys ‘R’ Us site, giving Target.com an edge in a season where toy sales are set to benefit from hot properties like Frozen 2.

And Kohl’s will also benefit from an online connection now that it services Amazon returns at all stores. That should help the chain get a much-needed opportunity to win over prospective customers that had never considered shopping at Kohl’s before. Its Black Friday deals are centered on products like cameras, kitchen items, and video games, not surprising given how poorly apparel, its biggest category, is doing across the industry.

According to SEMrush, a trends data provider, clothing is only the eighth most searched for product category for Black Friday this season so far, well behind items like laptops, toys, and headphones. That does not bode well for Kohl’s and department store peers like Macy’s and Penney, or for clothing chains like The Gap.

A little something different

Adding to the pressure on department stores is the growing number of brands deciding to sell directly to consumers on their own site or stores, rather than through retailers. “These brands don’t need to rely on third party sellers anymore, they can go direct,” said Harley Finkelstein, Shopify’s operations chief.

Analysts expect it to be a good weekend for for retailers that sell products consumers can’t find everywhere else or, at least, those that making shopping easy.

“You have to offer exclusive product that’s not available at a million places,” says Craig Johnson, president of Consumer Growth Partners. “Otherwise you’re off into commodity land.”

With a late Thanksgiving this year leaving retailers with six fewer days to recalibrate their strategies if the long shopping weekend is a disappointment, it’s not surprising to see so many leaving little to chance.

As Target’s Chief Executive Brian Cornell recently put it: “Every single day if you’re in retail… counts from Black Friday to Christmas Eve.”