Barry Ritholtz, a Bloomberg View columnist writing about finance, the economy and the business world recently wrote a piece, "Black Friday's Guesswork Gloom," criticizing the National Retail Federation's black Friday spending reports.
We don't know what Black Friday sales were, not yet. And we certainly don't know what the impact of the actual number will be on final holiday retail data. How did we get these numbers, which almost by definition are wrong? It is a combination of a retail trade group that cares little for accurate economic data, a terrible survey methodology and a naive and lazy news media, which seems to believe its role is to mindlessly repeat whatever nonsense is peddled by the aforementioned trade group.
This report is similar to the annual Holiday Spending Sentiment Survey conducted locally here at St. Thomas by several faculty from the Opus College of Business Marketing Department. We reached out to Professor Emeritus Lorman Lundsten, one of the researchers for the St. Thomas study for his opinion on "intent surveys."
Says Lundsten:
Almost all surveys of spending intent taken in advance are possible to criticize in this fashion. I suggest that the proper question is not "Does the survey produce an absolutely accurate estimate of future spending?" The answer to this is is "No". This is because of sample size issues (we don't ask everyone) and by systematic response issues among the respondents. In general, people like to be seen as rational beings who shop carefully and seek maximum value. Actually, shoppers can be motivated by irrational factors which are hard to estimate in advance.
However, the question should be "Does the survey produce useful information related to holiday spending?". If the survey shows a growth in spending intent, is this matched by an eventual increase in spending? If the survey shows differences in spending patterns between demographic groups, does this show up in the stores? Can the survey be used for planning by retail merchants who need to plan for holiday sales? The answers to these questions are much more likely to be affirmative.
We continue to ask a wide variety of questions to be able to put our point estimate of spending in a useful framework and we feel that it provides a useful look at likely spending.
