Happy Fact-Free Black Friday
Nov. 25 marked Black Friday, which once was considered the beginning of the holiday shopping season, though the start these days is even earlier thanks to endless hype by the retailing industry. News reports today are filled with tales of increased traffic, decreased spending, tremendous discounting. As was widely reported, sales fell because of deep price cuts, even as more people went to the stores to go shopping.
The reality is, this story is made up. To be more precise, we have no idea what the actual sales data is yet. Despite what you might have read, we haven't the slightest idea of what Black Friday retail numbers were, nor do we know how strong or weak store traffic was.
Why is this? On Sunday, the National Retail Federation released its annual post Black Friday report. It is based on surveys (and other questionable methodologies) that are unreliable and have a poor track record, due to the inherent unreliability of consumer self-reporting.
Here is one of the highlights in the Federation's news release: “Average spending per person over Thanksgiving weekend totaled $289.19, down slightly from $299.60 last year.”
The group drew this conclusion based on a survey in which 4,330 consumers were asked about their shopping plans. The survey, according to the Federation, has a margin of error of plus or minus 1.5 percentage points.
Surveyors asked consumers how much they planned to spend over the weekend and those who were willing to give an answer spat out a number. (They also provided last year's spending off the top of their heads.) But how accurate is it? The obvious answer is, not very. At least the Federation has a sense of humor in reporting planned spending to the penny -- and not just for this year, but last year too.
The better way to judge the holiday shopping season is to use real data. Of course, as of today, none of the reliable data sources for retail sales have reported their numbers yet. Credit-card companies are still reviewing their figures while retailers are still tallying up their sales results. The first accurate read we get is next month, when November retail sales figures will be released. In January, we will get the full holiday shopping figures. For now, we have only anecdotal reports and impressionistic personal recollections of spending for holidays past.
To get an idea of how unreliable early Black Friday data is let's try an experiment: Start with how your memory and recall operates. It is neither precise nor accurate -- a polite way to say it is not all that good. Quick, what did you spend last year on holiday gifts? My pet thesis is that you've been trained to respond with an answer -- any answer -- other than “I don’t know” or “I don’t remember.”
But unless you have an uncanny sense of recall, and actually tallied up last year's spending, “I don’t know” is the only accurate answer. Instead, most of us suffer from the erroneous belief that admitting we don’t know in response to a question is somehow a sign of ignorance or stupidity. So the natural response for most people is to instead make up a ballpark number that sounds somewhat reasonable.
At least it won't as long as the National Retail Federation is in business. This is because the Federation is a trade group. Its interests don't necessarily lie with reporting news or events accurately, but with advancing the interests of its members. The members, after all, provide the money that pays the Federation's bills and keeps its employees grinding out news releases about holiday sales. So what the organization presents as news should really be seen more along the lines of advertising -- it does contain information, but it may or may not be all that factual.
Since facts don't seem to matter to Americans very much anymore, the easy thing to do is to lean back and let the endless waves of nonsense wash over you. I refuse to do that.
You cannot make investments based on fantasies, nor can you govern yourself nor make public policy if you lack a firm grip on reality. My self-appointed task is to constantly remind you of this.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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