Two case studies help illustrate the impact of opening early on Thanksgiving
Every year, it seems like Black Friday deals start earlier and earlier. Some brands famously refuse to open on Thanksgiving to preserve the sanctity of the holiday, give their employees the time off, or to make a stand for their brand. Others are opting to open before Thanksgiving dinner is even served.
For the moment, we are putting aside the intangible moral and ethical debate, and are looking purely at the statistics. As the leader in location intelligence, Foursquare has the unique ability to observe broad cultural trends by analyzing the foot traffic of users of our apps, Foursquare City Guide and Foursquare Swarm, and selected partners that leverage our location technology. We used this data — always anonymously and in aggregate to protect privacy — to examine the situation from an economic point of view. When should retailers actually open their doors? As sales start earlier and bleed into Thanksgiving Day, how much are retailers benefiting, and how important is it to keep up with competitors' plans?
Our conclusion: Stores that open earlier drive more visits — and steal share from their competitors, who never recover the volume.
Let's take a closer look.
Case Study #1: Blue Law States vs. Free-for-all States
First, we decided to tackle the debate on starting sales on Black Friday vs. on Thanksgiving, by comparing foot traffic in what we're calling “Thanksgiving Blue Law states," to comparable states with no legal restrictions. In New England, certain Blue Laws prohibit retailers in three states from staying open on Thanksgiving Day: Massachusetts, Rhode Island, and Maine. Dating back to colonial times, these laws were originally put into place to guarantee a restful holiday observance.
While the three Thanksgiving Blue Law states saw an average foot traffic lift of 23% over the Thanksgiving weekend (Thursday through Sunday) in 2016 compared to a baseline weekend — the rest of the Northeast* (Vermont, Pennsylvania, Connecticut, and New Jersey) with no legal restrictions saw a greater average foot traffic lift of 35% the same year. This showed us that retail performance over the full weekend was significantly higher in states that allow shopping on Thanksgiving Day.
This point is made even more obvious when we isolated Thanksgiving Day traffic from the rest of the weekend. We see that on Thanksgiving, retail foot traffic in the Thanksgiving Blue Law states dropped 85%** (compared to an average Thursday), a much more significant drop than retail in non-restricted states, which only dropped 22%. On the other hand, all states saw comparable lift in retail volume on Black Friday and throughout the rest of the weekend.
This indicates that overall, non-restricted states have a competitive lead, as the Thanksgiving Blue Law states never make up for the lost ground from Thanksgiving Day. As we continued our analysis, we found even more evidence for this.
*New York was excluded from this analysis because of population size and density of travelers.
**Why don't the Thanksgiving Blue Law states experience a 100% drop in sales on Thanksgiving? It's because of the Blue Law exceptions. Certain retailers such as pharmacies and gas stations are permitted to open in Massachusetts.
Good News Travels Fast
Further underscoring the negative impact of Blue Laws on the retail sector, our data shows that residents in the Thanksgiving Blue Law states are pushing the boundaries of the laws as best they can.
First, our data shows that shopping between the hours of midnight and 3 a.m. accounts for only 3% of the total US foot traffic to the top 500 retailers on Black Friday. However, in Rhode Island, Massachusetts and Maine, that percentage rises to as high as 14%. Residents in those states are clearly lining up and raring to go.
We found another, even stronger indicator that these shoppers are highly motivated; in New Hampshire, 29% of retail traffic on Thanksgiving Day is made up by visitors from Massachusetts, Rhode Island, and Maine (a significantly higher proportion than an average Thursday). Moreover, 60% of these same visitors did not make Black Friday shopping visits the following day back in their home state retail stores. While it's important to note that New Hampshire does not have sales tax, which could be partially responsible for the influx of visitors, this still represents a major missed opportunity for Blue Law states to generate revenue from Black Friday sales.
Case Study #2: For Mid-Tier Department Stores, Timing is Everything
We have observed that stores opening on Thanksgiving Day leads to more sales and market share for states that allow early shopping. What about the exact time that stores open, in this competitive period?
To understand the impact of Thanksgiving retail hours on in-store visits, we looked at three national department stores, JCPenney, Macy's and Sears, who were locked in a heated holiday race last year with a similar competitive set and bargain-hungry consumers. JCPenney had the earliest Thanksgiving Day opening at 3:00 p.m., followed by Macy's at 5:00 p.m., and then Sears at 6:00 p.m.
So which of the individual retailers had the strongest Thanksgiving Day lift? JCPenney's earlier opening brought in nearly 3x as many customers, with a 280% lift in foot traffic as compared to a baseline Thursday. Macy's, on the other hand, saw a 120% increase, while Sears only received a 90% bump. Though JCPenney and Macy's were neck and neck Friday through Sunday, both with a 120% lift versus a baseline weekend; with the Thursday surge, JCPenney winds up having a total Black Friday weekend lift of 150% as compared to only 120% for Macy's.
JCPenney's impressive performance generated another interesting insight. Between 3–5 p.m, the first two hours of opening, the retailer saw 26% of their total Thanksgiving Day foot traffic — and the first hour of opening was also the busiest of the day. While each individual chain shows growth, there is a definite impact of JCPenney's early start. So, if you are wondering if an hour can really make a difference — it can. In fact JCPenney will open another hour earlier this year, at 2 p.m. The retailer likely knows that opening early makes a big difference to its own bottom line, and its competitors haven't yet caught on. Combined with a strong Q3, where JCPenney saw same-store sales increase by 1.7%, we anticipate this year, JCPenney will steal even more share away from competitors. Holiday shopping is a truly critical period for JCPenney; this period makes up for its struggles throughout the rest of the year.
The Takeaway for Retailers:
Our data shows that there is an obvious benefit to retailers that open days and even hours ahead of their competition. Of course, there are a lot of factors that go into deciding when to open, not the least of which is the moral question of encouraging shopping around the Thanksgiving holiday. But considering the importance of the volume of holiday shopping for a troubled sector, it may be worth some additional strategic planning.
How Foursquare's Location Intelligence Can Help:
Based on our analysis, Foursquare can help retailers target, reach, measure and message consumers in order to drive business results during this critical time of year. Here are some ways we can help:
- Retailers accurately reach and target consumers in order to drive foot-traffic and sales with Pinpoint by Foursquare. Pinpoint provides a deep understanding of consumer foot traffic behavior and market preferences, helping to ensure brands are investing their media dollars to reach the right consumers based on actual real world behavior.
- Advertisers can measure how their cross-platform advertising is driving in-store visits (and from which type of consumers), to improve their media mix in real-time using Attribution by Foursquare.
- Brands and developers with apps can alert users of timely deals, delivering the right content at the right time and the right place, leveraging Foursquare's Pilgrim SDK.
Foursquare has more than 50 million monthly global users of its apps, Foursquare City Guide and Foursquare Swarm, and websites. Data from these location-based apps, anonymized and in the aggregate, give an understanding of trends and notable shifts in human behavior.
For this study, Foursquare analyzed a statistically representative subset of data from its apps. Foursquare normalizes all data against U.S. census data, ensuring that the panel of millions accurately matches the U.S. population to remove any age, gender or geographical bias.
For the Blue Law state analysis, Foursquare analyzed visits — including both explicit check-ins (from Foursquare Swarm) and passive visits (from both apps) — to the top 500 retail chains in Blue Law states (Massachusetts, Maine, Rhode Island), versus non-restricted states in the Northeast (New Jersey, Vermont, Pennsylvania, Connecticut), in order to determine the impact of closing retail stores on Thanksgiving Day. The changes in foot-traffic over the holiday shopping weekend were compared to a baseline average of foot traffic on Thursday through Sunday across two non-holiday weeks in October.
For the department store analysis, Foursquare analyzed visits to mid-tier department store chains (JCPenney, Macy's, and Sears) on Thanksgiving Day 2016 compared to average foot traffic across three non-holiday Thursdays, in order to determine shifts in foot traffic.