'Black Friday' Lures Shoppers; Frugality Hits Videogames

Aggressive Bargains Lure Hordes of Shoppers, but They're Still Slow to Open Wallets says the Wall Street Journal in 'Black Friday' Tests Economy

Retailers succeeded in enticing deal-hungry shoppers into their stores on Friday, but at the checkout lines many people were sticking to the most deeply discounted items. That may prove to be a disappointment to executives at the nation's major chain stores, which have been battered by the recession. Many have been hoping that, once in the stores, consumers would spend a little more freely than they did a year ago.

Brian Dunn, chief executive of Best Buy Co., said Friday that consumers were snapping up lower-priced electronics such as netbook computers, digital cameras and smaller flat-screen televisions. "But this is not a year where wallets are expanding," Mr. Dunn said. "There will be winners and losers this season in retail, and the differences will be pronounced."

One bright spot in the retail picture has been online sales -- but even there much of the traffic has been driven by deep discounts at mass merchants' sites and at giant Amazon.com Inc.

The frantic Black Friday promotions, which began well beforehand this year, were driven by a troubling reality for retailers: many shoppers say they plan to spend less this season. "I don't think there's a lot of impulse shopping going on," said James Fielding, president of Walt Disney Co.'s Disney Stores. "People are just being realistic about their personal situation and the economy."

Frugality Hits Videogames

Game makers are finding that the once insatiable demand for videogames has hit the brick wall of consumer frugality, at least according to pre-event sales.

The Wall Street Journal reports Videogame Sales Running Out of Gas Ahead of Holiday.

Videogame sales?the bright spot in last year's dismal end-of-year shopping quarter?are showing signs of weakness, foreshadowing a tough holiday. Sales of some of the most anticipated titles have already disappointed and, others won't be on store shelves in time.

Early sales of what were expected to be big holiday games?specifically Activision Blizzard Inc.'s "Guitar Hero 5" and MTV Games' "The Beatles: Rock Band"?have so far been relatively modest. Both games, released in early September, dropped out of the top 10 best-selling games after a month, selling fewer than 100,000 copies each in October, according to NPD Group.

Overall, videogame sales including consoles fell 19% in October to $1.07 billion from a year ago, according to NPD. Software sales alone fell 23%. "October unfortunately is a good predictor of what's going to happen in November and December," said Jesse Divnich, a videogame analyst with research firm Electronic Entertainment Design & Research.

Deep Discounts

• Best Buy is offering Electronics Arts Inc.'s "Dragon Age" for $34.99, a $25 discount.
• Wal-Mart is throwing in two free games and a Blu-ray movie disc, a $139 value, on purchases of the $299 Sony Playstation 3 game console.
• Sony Corp. and Microsoft Corp. recently cut the prices on models of their Playstation 3 and Xbox 360 gaming consoles by $100 to $299.99.
• Nintendo cut the price on its Wii console by $50 to $199.99.

Fewer game console sales is good news. Kids need more exercise, more outdoor activities, and when indoors play more educational games instead of videogames. Moreover parents need to stop wasting money they do not have.

Instead of videogames, how about a nice board game like Risk or an educational game such as Scrabble? And if you really want to save money, just get a deck of cards and play Euchre. It's much more sociable and the cost of a deck of cards is just a couple bucks.

By the way, stores may have lured shoppers with bargains, but the big question is "Did they make any money?"

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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