Thursday, December 19, 2013

U.S. Retail Sector: Where to from here?

There has been some predictably disappointing news from the retail sector so far this holiday sales season. I mainly track and report on fashion retail sales. However, this time of year I take significant notice of retail sales performance in general as an indication of disposable income spending that is so vital to the fashion industry.
As I sat down to start this article, this just came in on from the AP in an article titled: Holiday shopping season: A disappointment so far
Sparse crowds at malls and "50 percent off" signs at The Gap and other stores offer clues as to how this holiday season is shaping up so far: It's the most discount-driven one since the U.S. was in a deep recession. It's also the most disappointing for stores.
Sales are up 2 percent to $176.7 billion from Nov. 1 through Sunday, according to data provided to The Associated Press from store data tracker ShopperTrak. That's a slower pace than expected with days left in the season. ShopperTrak's predicts sales will rise 2.4 percent to $265 billion for the two-month stretch that's typically the busiest shopping period of the year.
The modest growth comes as the amount of discounts that stores are offering this season is up 13 percent from last year — the highest level since 2008, according to financial services firm BMO Capital Markets, which tracks 20 clothing stores.
It is apropos that the AP references the 2008 Recession because that is where I planned to start.
The global financial crisis of 2008 has a few monikers depending where you come from. In many parts of the world it is known as "The GFC". In others, "The 2008 Crash". Here in the US, it's just plain "The Recession".
If you were living in the US at the time, you will never forget it. As the actor William Hurt says in his portrayal of then Secretary of the Treasury, Henry Paulson in the 2011 movie "Too Big To Fail", "You want too big to fail? Here it is!"
I was a Commercial Banker in a previous life. The bank I worked for was the subject of unfounded rumors of financial weakness in the early '90's. Our office was above a branch of the bank. There I witnessed that unique and unforgettable phenomenon, a bank run.
The visceral human panic of a run has to be experienced to fully comprehend. All common sense and logic leaves, replaced by a palpable fear and anger.
You could feel something like that panic in 2008. Peoples' financial security was disappearing before their eyes, the entire financial system of the largest economy on earth was teetering, and took an enormous, unprecedented injection of public money into the private financial system to eventually stabilize the system before the unthinkable.
I was living in Japan during the 1990's when the effects of the bursting of the financial bubble in '91 started to set in. Japan is only just starting to slowly pull out of the subsequent economic malaise. Only just, after 20+ years.
What has all this got to do with the current state of the US retail sector; everything.
It has been laughable to listen to the critics of the current Obama administration complain that he hasn't "got the economy going again". The recession might be technically over but we will be dealing with the effects for a long time.
I remember speaking with someone during the '08 presidential campaign and saying that I thought that even if Obama won two terms, we would still not be through to the other side. Unfortunately, my prescience is looking like an unwanted ability.
Add that there has been so much gridlock and enmity in Washington throughout the Obama administration, it is not surprising that little substantive positive impetus at the national legislative level.
We have a long way to go before we see anything like a healthy and thriving retail sector in the US. And when I say "healthy and thriving", I mean one supported and sustained by actual disposable income and not poisonous credit. The good thing is that I believe many people have learned the lessons of the credit madness that led up to 2008.
from the Hartford Courant - September 16, 2009
from the Hartford Courant - September 16, 2009
Disposable income is dependent on steady employment levels, and job and income growth. We just aren't there yet by a long stretch. Hence, the tepid holiday sales activity.
As a consequence, it has been reported that stores are discounting deeper earlier this year. It always has to be remembered that sales do not equal profits. If you are giving away margin for the sake of ringing the register, it can come back to bite.
It also needs to be remembered that these are not just numbers. This is the time of the year when most retailers make the bulk of their money. 20 to 40 percent of yearly sales for small and mid-sized retailers take place within the last two months of the year according to the National Retail Federation (NRF).
Even though ShopperTrak tells us that 90 percent of U.S. retail sales are projected to occur in brick and mortar stores, the ongoing weak retail numbers and the meteoric rise of online shopping must be putting the bricks and mortar small business retailer under enormous pressure.
Here's more from the trade papers over the past month:
  • Sales during Thanksgiving weekend and Black Friday, which is considered the traditional start of the holiday retail season declined 2.9 percent compared with last year, to $57.4 billion. It was the first time that happened since 2009, during the height of the Great Recession, according to the NRF.
  • Online retail sales soared and broke records. E-commerce sales on Black Friday skyrocketed to $1.198 billion, which was a 15 percent increase over last year, according to comScore Inc., a Reston, Va.–based company that analyzes e-commerce sales. It was the season’s first billion-dollar day, according to comScore.
  • Jeff Van Sinderen, retail analyst for financial firm B. Riley & Co., forecast that retail sales will perform anemically from 1 percent to 2 percent. However, he considered it a decent performance in light of all the pressure retailers have been working against.
  • Stubbornly high unemployment numbers and falling wages across the American economy made people cautious, said Kimberly Ritter Martinez, an economist with the Los Angeles County Economic Development Corp. “People were out there shopping,” Ritter Martinez said of the Black Friday weekend. “But they made budgets for themselves, and they’re sticking to them. They may have money, but they are hesitant to spend.”
  • It also was a Black Friday weekend when a lot of people don’t have money. The unemployment rate for the U.S. is 7.3 percent and 9.5 percent in Los Angeles County, according to the Bureau of Labor Statistics. If all the people who stopped looking for work are counted, the number is 13 percent of the U.S. population.
  • America’s Research Group’s consumer survey found nearly half of consumers are looking for 70% off or more in their last-minute shopping trips.
So, where to from here for US retailers? The answer is online. And more specifically the on mobile devices and on social platforms. reports that:
The mobile revolution has reached another milestone: Consumers now spend more time interacting with online retailers on smartphones and tablets than they do on desktops and laptops.
55% of all time spent with online retail in June 2013 occurred on a mobile device, finds web and mobile measurement firm comScore. 45% occurred on desktops and laptops. Specifically, smartphones accounted for 44% of retail Internet minutes while tablets accounted for 11%, comScore says.
Retailers need to make sure their websites match the look and feel of their businesses, are kept updated, have all the functionality required, are responsive and SEO'd to perfection.
As for social media, there is so many platforms that the trick is to pick three or four that best suit the business and work consistently on those.
A basic four platform strategy would be: Facebook, Twitter, You Tube, and Instagram or Pinterest. These can be linked so that content is automatically posted contemporaneously and instantaneously.
Drive business to your website with new, fresh content flowing through these channels that lets your prospective customers primarily know who you are rather than what you are selling.
Bricks and mortar retailers must have effective online strategies to survive. There is just no way around it.
There will be no going back to way things were. The online shopping evolution has taken care of that reminisce.
As for overall shopping activity, we are going to have to just ride out the ongoing reverberations of 2008 until the disposable income is there to support a healthy circulation of the money supply.
Today's news that The Fed has begun a tapering of its extraordinary bond purchases which have flooded the United States and the world economies with over $US3 trillion of cheap capital since the GFC is great news. It is a significant step towards the world's largest economy finally leaving 2008 behind.
Paul Brindley

Wednesday, December 11, 2013 - Facebook Ranks as Top Platform in Social Media Survey

There are some very interesting social media usage stats in this article on today's
According to the survey, Facebook is the most trusted for brand recommendations.
What I find interesting is the personal connection to both the information givers and the stories that they tell. People trust those closest to them; no surprise there. But the fact that the research shows that people want to hear personal stories about product and service recommendations from their friends and social circle rather than from bloggers and experts is refreshing, and something that was predicted to change by the advent of social media.
This sea change in product marketing should also be exciting for brands because it shows the value of direct engagement with their customers. Brands should be spending at least as much time on strategies that generate authentic feedback (positive or otherwise; remember to keep it real in social media) from their customers as cultivating bloggers and seeking industry validation.
Paul Brindley

December 10, 2013

Facebook Ranks as Top Platform in Social Media Survey

When it comes to product and service recommendations, Facebook scored highest as the most trusted platform, according to a new survey conducted by Social Media Link, an advocacy activation company.
Some 10,337 people who are active in social media were surveyed online. Ninety-three percent were women, and 70 percent of all respondents were between the ages of 25 and 44.
The survey found that 68 percent said they trusted Facebook over blogs (63 percent); retail Web sites (63 percent); Pinterest (56 percent); YouTube (51 percent); Twitter (41 percent), and Google+ (41 percent).
“During the holidays when everyone is looking for trusted information on what to buy, recommendations from your social circles on Facebook will carry the most credibility,” said Susan Frech, chief executive officer of Social Media Link. “Undoubtedly, the survey found that people don’t need hundreds of recommendations and reviews to entice purchase. It’s really about receiving a quality message from a trusted source.”
Jordan Herrmann, marketing director of Social Media Link, added, “The data we found showed a few points that we believe demonstrate how recommendations from Facebook friends can drive transactions. The results showed that Facebook is the most trusted platform, and, when it comes to making an actual purchase decision, friends and family were ranked as having the highest impact. When thinking about your Facebook social circle, friends and family are an enormous part of it, if not all of it.”
According to the study, reviews by friends and family have the biggest impact (86 percent), followed by professionals (58 percent); Web site reviews (54 percent); acquaintances (42 percent); bloggers (39 percent), and celebrities (11 percent).
Herrmann explained that the reason Facebook has the most impact is because the network is one of the most closed, where relationships are valued. The implication for brands, she said, is that they may be missing the opportunity to use small social circles because brands often focus on bloggers and influencers in social media. However, the study showed their opinions may carry less weight. The idea isn’t to discount bloggers, which she said are so important to fashion, beauty and luxury, but rather to explore the huge additional opportunity to leverage social recommendations through an individual’s social circles and to implement this tactic with scale.
Forty percent of those surveyed said the most valuable reviews are those that contain personal stories, rather than a list of product benefits, which were most valuable to 34 percent. Star ratings are less influential; just 15 percent said they’re the most valuable in influencing purchases.
People trust online posts and reviews most for household products (23 percent); personal beauty items (18 percent); electronics (16 percent), and restaurants (15 percent), according to the survey.
According to the study, people trust product recommendations from people they know (92 percent), more than e-mail (50 percent), TV (47 percent), print (47 percent), outdoor ads (47 percent) and radio (42 percent).
The survey examined why people share their opinions online and found that a positive experience with a brand was the primary driver of online reviews. Some 78 percent said they shared their opinions based on their experience. Less than half, 47 percent, said a negative experience prompted a review. Forty-six percent said they like sharing their opinions with others, while 43 percent said they shared opinions online to help inform others.
Finally, some 77 percent of those surveyed said they needed to see less than 10 reviews to prompt them to make a purchase.
Among the key takeaways are that rather than focusing on the overall number of recommendations for one’s brand, one should concentrate on how to generate content that will have the strongest impact. In addition, brands should focus on encouraging their consumers to share personal stories, mobilize advocates to share within their close social circle, and look for those who have had a great experience with one’s brand, according to the survey.