One of the biggest controversies of the holiday season is stores opening on Thanksgiving itself. It's something that's fairly controversial, but it's a trend which does not appear to be going away anytime soon.
In this segment of Industry Focus: Consumer Goods, Motley Fool analyst Vincent Shen is joined by Fool contributor Daniel Kline, who strongly believes that stores need to be open whenever their rivals are. The two talk about brand loyalty and what happens if a certain retailer stays closed while its rival has opened. Furthermore, Vincent and Dan discuss how being open impacts employee morale and what stores can do to keep their staff from being angry at having to work.
A full transcript follows the video.
This podcast was recorded on Nov. 22, 2016.
Vincent Shen: I want to touch on, it seems to be a little bit controversial, or at least people fall into two different camps here -- whether stores should keep their doors open on Thanksgiving versus Black Friday. A lot of companies have jumped into the camp, and they believe that Thanksgiving, for example, just let employees have their day off, spend this time with their families, do whatever it might be, have that time available. Nordstrom, Barnes & Noble, Bed Bath & Beyond, T.J. Maxx, Cabela's, Costco, and REI, which we talked about last year, they generated a lot of discussion around this topic, with their #OptOutside marketing. With the numbers going around, with people spending their time at stores during the traditional Black Friday window, that has shrunk, because, as you mentioned earlier, it's spreading out more. What do you think? What's your take on this whole Thanksgiving, open/not open?
Dan Kline: The only company not making a mistake is REI. REI is a lifestyle brand built around activity and being outside. For them to close and tell you to go take a hike instead is a smart public-relations move. Everybody else is making a mistake, and here's why. Most consumers have very little brand loyalty. If I've decided I'm going to shop on Thanksgiving Day, even though I love Barnes & Noble -- if I want to buy books and Barnes & Noble is closed and Target is open, I'm going to go to the store that's open. Very few people are waiting to go to their favorite store.
Now, if you're a specialty retailer, if you're selling jewelry or something very unique, OK, you can close your doors. But if you are a mass-merchandise retailer, if you don't open on Thanksgiving, those are sales you're losing that you're not getting back. And very few stores are going to get enough of a public-relations bump to say, "This was a good move." As far as the whole employees-getting-a-day-off thing, I worked retail for two years, I ran a giant toy store, and I would have opened on Christmas Day, I would have opened every single day. I used to open Easter alone just to have the sales. The reality is, if you work in retail, you are used to working bad hours. You work Sundays, weekends, and holidays. Thanksgiving doesn't need to be an exception, because it's your paycheck. If your store is open, it's taking in more money, its bottom line is going to be better, and there's really no reason, unless every retailer closes, for any retailer to close.
Shen: That's an interesting take, and I have to say you make a very good point with the idea that, unless you have a brand with incredibly strong loyalty, or some kind of specialty goods, or something along those lines, that if somebody wants to shop on Thanksgiving, they will simply go where the doors are open, and you lose out on that share of their wallet. But I do want to say, some people who have argued against the idea of keeping your stores open on Thanksgiving is that, maybe not so much with consumers, in terms of winning them over with that promotion -- maybe REI is doing it right, like you mentioned -- but in terms of company morale and overall how that plays out with your various stakeholders and that public image, the morale of employees, the longer-term, less tangible effect they have --
Kline: Here's the thing, I'll go back to my retail experience -- there's a way to manage that. If I ask people -- first of all, for holidays, I took volunteers first. Who wants the hours? There are plenty of seasonal employees at all of these places that are just going to want the hours. Second, I made the day fun for employees. There would be pizza, there might be snacks, there might be sales contests, there might be giveaways. As a retail manager, it is your job to make it so that when people have to come in on a day they otherwise wouldn't be coming in, that it's part of the rah-rah, go team. And maybe they're getting a bonus day off in the summer. Maybe they're getting entered into a lottery where one in every five employees gets an extra three days off. Whatever it is, there are absolutely ways to manage morale without making that a negative. You can't ignore that, you're absolutely right. Who wants to leave Thanksgiving and have to come in to work? But some people do, and others can be incentivized to.
Shen: Fair enough. I think when you are at the scale of some of these bigger retailers, it definitely makes it much more challenging to get those incentives right. But it's definitely interesting. I'm curious to see how the winds blow in terms of people's preferences, where the industry takes that. But overall, I think there will always be that die-hard contingent of stores that have their locations open on Thanksgiving Day, maybe sometimes the whole day, maybe sometimes just half the day, but wanting to hit those customers who are eager. Maybe it's a tradition for their family to go out after dinner.
Kline: I won't be anywhere near those stores. There's absolutely nothing you can't buy online that anyone is getting on my list. If you're on my Christmas list and you want something I can't buy on Amazon, or otherwise digitally, you are absolutely out of luck.
Daniel Kline has no position in any stocks mentioned. Vincent Shen has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon.com and Costco Wholesale. The Motley Fool recommends Bed Bath and Beyond and Nordstrom. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.