On October 22, 2013, governor Robert Bentley of Alabama announced that Black Friday is now officially a paid holiday for Alabama state employees. In the same announcement, governor Bentley also added Christmas Eve to Alabama’s list of official holidays, explaining, “I want [state employees] to know how much I value your service.”
This is undoubtedly good news for the state’s workers and their families, but what were the motivating factors for this change? One likely factor: Black Friday isn’t necessarily the busiest shopping day of the holiday season anymore, which means states are starting to miss out on the day’s sales tax profits.
A key day for profits
Although he didn’t explicitly say so, governor Bentley may have had another motivation for assigning state holiday status to Black Friday in particular: ensuring that state employees will be off work on Black Friday may be part of a sound economic strategy. Black Friday sales have been eroding due to competition from online promotions and other major sale days at physical store locations across the country. The governor may be trying to combat the trend – and keep as much holiday business as possible in Alabama – by making it easier for state employees to go shopping on Black Friday right in their own communities.
Both businesses and the government stand to benefit if more people – in Alabama’s case roughly 35,000 state employees – are out shopping on Black Friday. After all, Alabama collects 4% on every retail purchase, so Black Friday can be an especially big day for sales tax revenue in the state. Assuming all 35,000 shell out the roughly $400 that the typical shopper spends on Black Friday, Alabama will do an additional $14 million of business and collect an extra $560,000 in sales tax on that day alone.
A troubling downturn
Considering the potential economic benefits, it’s easy to see why governor Bentley would want to try to reverse the decline of Black Friday, which has been considerable. By recent estimates, just four out of 10 consumers go out shopping on Black Friday, compared with more than five out of 10 only a few years ago. People appear to be spending a bit less altogether on the shopping holiday. On Black Friday last year, Americans dropped about $11.2 billion at brick-and-mortar locations – almost a 2% decline from what they spent at stores on Black Friday in 2011.
Why are sales on the downswing? It’s not a huge surprise when you consider that shoppers know they can often get better deals online or on different days, particularly on Cyber Monday and the weekend after Thanksgiving. Plus, many retailers have expanded their holiday shopping hours and begun offering online deals well in advance of Christmas. For example, Kmart stores will be open from 6am Thanksgiving Day until 11pm on Black Friday, while the start date for Walmart’s online promotions, November 8, is a month earlier than usual. For retail employees working over the holidays, longer and odder hours have become the norm, which could also account for a drop in Black Friday sales.
Why are officials so concerned with revenue from Black Friday in particular? The day is still a pretty good barometer of how the rest of the holiday shopping season will go for retailers. Strong sales that day typically indicates they’re more likely to end the year “in the black,” or at a profit, which is why the day after Thanksgiving has come to be known as Black Friday. With this in mind, it’s no surprise the state of Alabama would want to encourage strong sales on that day.
Will your state be next?
Although NerdWallet hasn’t heard of plans for any other states to make Black Friday an official holiday, it seems all the more likely now that Alabama has done so. Currently, nineteen other states already give employees that day off because it’s right after Thanksgiving. When you consider the potential economic benefit as well as the boost in morale that may come with having a day off, why wouldn’t every state make Black Friday be an official holiday?
Shopping photo courtesy of littleny / Shutterstock.com.