So the International Council of Shopping Centers (ICSC) and Goldman Sachs tell us that U.S. retail sales this holiday season rose 4.5% over last year. It sure doesn’t feel like it.
The National Retail Federation thinks retail sales have increased 3.8% this holiday season, down from a 5.2% increase last year. Where?
NPD Group, a consumer and retail market research firm based in New York, opines that deals made a difference. Marshal Cohen, chief industry analyst at NPD is quoted on Bloomberg.com as saying, “The holiday was better than expected. Consumers who were tired of living in this spending cocoon went out and bought what they needed and wanted.” Are you sure??
This sure looks like a painful holiday selling season to me. One of my social media clients has 2 retail stores in Los Angeles, one in the busy Belmont Store in Long Beach, and one in the economically devastated downtown San Pedro. I spent some time at both stores over the past week. How things have changed. 10 years ago, the Belmont Shore store used to have lines around the block at Xmas. Now, there are hardly lines at the cash register. As for San Pedro, you’d think it was a sleepy Sunday afternoon in the middle of summer most days rather than the week before Xmas – it was a ghost town.
I realize there are macro factors affecting both locations. Downtown San Pedro is lost as a retail center so not too much was expected. But Belmont Shore is supposed to be one of busiest specialty retail areas in this part of greater Long Beach. It is pretty clear that the affect of online retail that has been nibbling away at bricks and mortar retail sales in a serious way for years is now really starting to bite. comScore, a digital marketing intelligence collector, just released new numbers on U.S. online holiday spending for the season-to-date, and found that consumers continued to shop online in record numbers. For the first 56 days of the November-December 2011 holiday season, $35.3 billion was spent online – an increase of 15% over the corresponding days last year, and a new record. Ouch!
NPD Group’s assertion that the retailers that gave deals this year did better than expected may be accurate but what about margins? Sales are great but what about profits? Marshalls Department Stores lives on providing deals all year round. Their margins are dependent on their buying power. But how can you run a small retail business on the same principle? By the way, the woman at my local Marshalls thought that sales had not been as strong this year.
I am looking forward to seeing some of the sales data from sector to sector. In particular, the fashion sector. The chatter is that designers and sales showrooms in the Los Angeles fashion world are hurting. The fashion industry has been hit badly during this extended economic downtown. Things started to look up a little around mid-year. There was an air of optimism at the August round of fashion trade shows in Las Vegas (check out my blogs). That optimism evaporated as the year progressed. I know for a fact that a lot of inventory that was supposed to be hanging in retail stores for the holiday season got kicked back to the manufacturers. This means retailers aren’t moving goods, designers and manufacturers are sitting on inventory that cost to produce and has nowhere to go, and sales reps won’t be getting any commissions on those orders. Everyone is losing.
So do the numbers lie? You bet they do. Do I wish things were different? You bet I do. Am I being too pessimistic? I wish.
All the research firms and think tanks in the world can produce numbers that tell us that this is better than last year or that improved this year or things are on the upswing next year but on the street the pain continues. I am not saying to give up. The U.S. is still a huge market with incredible potential if you have the right product at the right price. But you better be ready to ride this economy out.
Keep an eye out for more on this from me soon.