THINGS had begun to look better. In October, after a bad year for the industry, retail sales began to show signs of improvement, exceeding forecasts and rising 1.4% compared with the previous year. Even one of the most battered retailers, Saks, a luxury department store, announced a small profit for the year to the end of October. This spurred cautious hope of a revival for retailers. Much was pinned on holiday season shopping.
News of November sales, delivered on Thursday December 3rd, dampened any holiday cheer. Sales were up by only 0.7% in November in comparable shops compared to the previous year according to Retail Metrics, a research firm. Sales at Saks and Abercrombie & Fitch, a clothes retailer, were down by 26% and 17% respectively. Even discount stores, such as Target, did not live up to analysts’ forecasts.
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November sales figures are a good guide to the health of American retailers. They include traffic from Black Friday, the day after Thanksgiving, when retailers usually start to rake in cash. The day boasts discounts so significant that retailers refer to some of them as “door-busters” and it marks the start of the holiday shopping period. This year hopes were high that Black Friday would see shoppers starting as they meant to go on—with wallets wide open. No such luck. Although more people went to the shops on Black Friday and over that weekend (195m, up by 13% from last year), they spent nearly 8% less per person, according to the National Retail Federation, an industry body.
Consumers, says Lew Paine of GFK Group, a market-research firm, may have trolled the Black Friday bargains, but are waiting to make a purchase. Last year desperate retailers discounted heavily after Black Friday, some knocking as much as 70% off some items. They are playing a “game of chicken” with retailers, says Mr Paine. It is a game that retailers are likely to lose. Already some stores have extended Black Friday promotions into December to shift stock. Others, like Best Buy, an electronics store, are offering a “deal of the day” on its website. Retailers are primed to continue to offer more discounts and special promotions as Christmas gets closer, say many analysts, depending on their level of desperation.
The only bright spot so far is online shopping. On “cyber Monday”, the online equivalent of Black Friday, falling on the Monday after Thanksgiving, sales increased by 5% this year to $887m, according to comScore, which tracks internet trends. Even retailers whose shops are suffering have seen online sales rise. Macy’s sales were down by over 6% in November in its department stores but online revenues rose by more than 22%.
The economic downturn has changed the behaviour of retailers. Steven Sadove, the boss of Saks, says the recession has “led us to rethink every aspect of the business.” One big difference is the way retailers are treating inventory. Stores have cut the number of items they stock, hoping to avoid discounting unsold merchandise. Some stores have cut inventory by over 20%. According to Diane Von Furstenberg, a designer who sells her clothes through department stores and her own boutiques, this is a change in strategy that will outlast the holiday season. “The whole industry needed a laxative,” she says, blaming the overabundance of inventory for last year’s widespread discounts. “There was too much of everything.”
Pared-down stocks means that shops may not have items that customers want. Because of this retailers are boosting in-store services, like self-service kiosks and cash registers equipped with internet capabilities, so customers can make online orders for items a store does not have. Another trend that may outlast this holiday season is a price war among traditional retailers and online “e-tailers”. Amazon, one of the biggest e-tailers, and Wal-Mart, a huge discount retailer, are battling to offer the most affordable DVDs, driving down prices to below $10.
Online shopping has made the price of items more transparent to consumers, and the recession has made finding the best price an economic necessity. That the lowest price will win is not a very jolly message for bricks-and-mortar retailers. But they are receiving it loud and clear.:SugarwareZ-065::SugarwareZ-065::SugarwareZ-065:
News of November sales, delivered on Thursday December 3rd, dampened any holiday cheer. Sales were up by only 0.7% in November in comparable shops compared to the previous year according to Retail Metrics, a research firm. Sales at Saks and Abercrombie & Fitch, a clothes retailer, were down by 26% and 17% respectively. Even discount stores, such as Target, did not live up to analysts’ forecasts.
Click here to find out more!
November sales figures are a good guide to the health of American retailers. They include traffic from Black Friday, the day after Thanksgiving, when retailers usually start to rake in cash. The day boasts discounts so significant that retailers refer to some of them as “door-busters” and it marks the start of the holiday shopping period. This year hopes were high that Black Friday would see shoppers starting as they meant to go on—with wallets wide open. No such luck. Although more people went to the shops on Black Friday and over that weekend (195m, up by 13% from last year), they spent nearly 8% less per person, according to the National Retail Federation, an industry body.
Consumers, says Lew Paine of GFK Group, a market-research firm, may have trolled the Black Friday bargains, but are waiting to make a purchase. Last year desperate retailers discounted heavily after Black Friday, some knocking as much as 70% off some items. They are playing a “game of chicken” with retailers, says Mr Paine. It is a game that retailers are likely to lose. Already some stores have extended Black Friday promotions into December to shift stock. Others, like Best Buy, an electronics store, are offering a “deal of the day” on its website. Retailers are primed to continue to offer more discounts and special promotions as Christmas gets closer, say many analysts, depending on their level of desperation.
The only bright spot so far is online shopping. On “cyber Monday”, the online equivalent of Black Friday, falling on the Monday after Thanksgiving, sales increased by 5% this year to $887m, according to comScore, which tracks internet trends. Even retailers whose shops are suffering have seen online sales rise. Macy’s sales were down by over 6% in November in its department stores but online revenues rose by more than 22%.
The economic downturn has changed the behaviour of retailers. Steven Sadove, the boss of Saks, says the recession has “led us to rethink every aspect of the business.” One big difference is the way retailers are treating inventory. Stores have cut the number of items they stock, hoping to avoid discounting unsold merchandise. Some stores have cut inventory by over 20%. According to Diane Von Furstenberg, a designer who sells her clothes through department stores and her own boutiques, this is a change in strategy that will outlast the holiday season. “The whole industry needed a laxative,” she says, blaming the overabundance of inventory for last year’s widespread discounts. “There was too much of everything.”
Pared-down stocks means that shops may not have items that customers want. Because of this retailers are boosting in-store services, like self-service kiosks and cash registers equipped with internet capabilities, so customers can make online orders for items a store does not have. Another trend that may outlast this holiday season is a price war among traditional retailers and online “e-tailers”. Amazon, one of the biggest e-tailers, and Wal-Mart, a huge discount retailer, are battling to offer the most affordable DVDs, driving down prices to below $10.
Online shopping has made the price of items more transparent to consumers, and the recession has made finding the best price an economic necessity. That the lowest price will win is not a very jolly message for bricks-and-mortar retailers. But they are receiving it loud and clear.:SugarwareZ-065::SugarwareZ-065::SugarwareZ-065: