Some visitors to Macy's (NYSE:M) website on Black Friday found that making a purchase from America's No. 1 department store was anything but smooth. Macy's website was unable to handle the heavy volume of Black Friday shoppers, forcing some customers to wait to reach the main site.
Black Friday is obviously a bad day to have website problems. Macy's needs to figure out what went wrong quickly in order to ensure the problems don't recur. That said, if the website slowdown was really just a one-time problem, it shouldn't impact Macy's fourth-quarter results much.
Macy's website can't handle the pressure
Between 12 p.m. and 5 p.m. EST on Friday, many people trying to access Macy's website were notified of a "temporary shopping jam." These customers were sent to a page telling them that they would be automatically redirected to the main website in about 10 seconds. (Some people reported significantly longer wait times and other website glitches.)
Macy's stated that despite the slowdown, it continued to receive a high volume of online orders throughout Black Friday. Nevertheless, it's clear that the company lost some e-commerce sales by not being able to serve everyone in a timely fashion.
Macy's wasn't the only retailer with Black Friday website problems. However, its main rivals -- such as J.C. Penney (OTC:JCPN.Q) -- didn't have any such trouble. J.C. Penney's website handled record traffic from mobile devices with no disruptions on Black Friday, according to CEO Marvin Ellison.
J.C. Penney also opened its stores at 3 p.m. on Thanksgiving Day, two hours earlier than Macy's. Employees and Thanksgiving purists may not have appreciated the change. However, the early opening appears to have paid off, as long lines formed in the mid-afternoon at J.C. Penney stores around the country.
Keeping things in perspective
Over the past two years or so, Macy's has faced stiff sales headwinds. The company simply can't afford unforced errors such as being unable to handle all of the traffic to its website.
That said, last week's website problems may not hurt Macy's much. U.S. e-commerce sales soared to $3.34 billion on Black Friday, up 21.6% year over year, according to Adobe. Yet that will be just a small piece of total holiday sales. The National Retail Federation estimates that retail sales will reach $655.8 billion during the holiday season this year.
Indeed, online spending still represents a relatively small proportion of holiday spending. Despite the wide availability of "doorbuster" deals online, a record 16,000 people lined up outside the Macy's flagship store in Manhattan before it opened at 5 p.m. on Thanksgiving Day.
Furthermore, Black Friday isn't the biggest online shopping day of the holiday season. Macy's has all of "Cyber Week" and the month of December to catch up on lost sales. Many of those days tend to generate higher e-commerce sales than Black Friday.
One big risk
Considering that e-commerce sales on Black Friday represent a relatively small proportion of total holiday spending and that the Macy's site never fully crashed, it's unlikely that Macy's lost enough sales from its website slowdown to materially hurt its Q4 revenue.
Thus, the biggest risk is that the Black Friday website snafu turns shoppers against the Macy's brand altogether. Obviously, that would have a longer-lasting impact on sales.
However, while shoppers may get frustrated by website problems, glitches of this sort are quite common. As a result, most people are willing to forgive and forget. But Macy's is on probation with its customers. If it has any more website problems over the next month, it could lose customers for good.