The Coming January Retail Headache

Right before Christmas, I had the chance to walk 5th Avenue with Natalie Zmuda from Ad Age (see Retailers Forced Into Heavy Pre-Christmas Discounts) and, like the rest of us, I've spent the last few days visiting a variety of stores in the post-Christmas rush that's being dubbed the new "Black Friday." From the news reports I've seen, holiday shopping was down across the boards, with the exception of Amazon, which seems to have had it's best holiday ever. According to an article in the Washington Post today:

SpendingPulse, a division of MasterCard Advisors that tracks spending, said its preliminary data show that online sales fell 2.3 percent compared with last year's holiday season. Overall retail sales fell 5.5 percent to 8 percent. Excluding auto and gas sales, the decline was 2 percent to 4 percent.

On Sunday, we went up to Woodbury Common Premium Outlets and it was pretty busy, even at 6 PM when we arrived. What was amazing is that we went into some stores where not even a 50% discount was enough to get people to buy. I know that was certainly the case with us in several stores. I mean, if I could buy jeans at Eddie Bauer's for $19.99, why would I take a 20% discount on $60 jeans elsewhere? There were stores advertising a 20% - 30% discount that we didn't even walk into -- nothing less then a 50% discount was going to get us across that store threshold! And we certainly did some buying, but not as much as we would've done in past years and, much of it was just staples, like new turtlenecks for Sydney. And I'm not sure that we spent more then about $10 on any one item. And I can only say that anecdotally, I'm hearing similar things from friends and acquaintances. People weren't really buying the big gifts that they've bought in the past. Lots of smaller, more practical gifts.

And this is from a piece at msnbc.com today:

But consumers who saw plenty of bargains before Christmas still seemed to be spending carefully — meaning even the big discounts may not be enough to salvage one of the most dismal holiday shopping seasons in years. Some were unimpressed with even rock-bottom prices while others were just flat-out returning items for cash.

Sales of women's clothing dropped nearly 23 percent while men's clothing sales slipped more than 14 percent. Footwear sales fell 13.5 percent. Sales of electronics and appliances fell even more drastically, dropping almost 27 percent.

Retailers for their part, did whatever they could to get us into the stores, short of just giving everything away. According to a story in the Wall Street Journal today:

In the final countdown of one of the worst holiday retail seasons in decades, more retailers have extended hours and are staying open for 24-hour periods or more in a last-ditch effort to capture sales. Macy's Inc., L.L. Bean International, Wal-Mart Stores Inc. and Hennes & Mauritz AB's H&M chain added extreme hours at select locations this year, they said, as a way to enhance customer service, reduce congestion and compete for last-minute sales.

"In this kind of environment, you do whatever it takes," said Michael Niemira, chief economist at the International Council of Shopping Centers.

Part of the problem, however, was that when you went into these stores, you couldn't always find people to help you and some of the cash register lines looked like they went on for blocks. And again, my experience this year was that in most stores, the odds of finding someone to help you were about as good as finding buried treasure. And sometimes, it would've been just as valuable! Twice now I've been in stores where literally, the person helping us stopped in the middle to announce that they were on lunch/break and needed to go. And they did! I guess if I had gone into some of the stores really late or very early, I would've gotten better customer service, but I always thought that they should be sensitive to my needs, not the other way around.

And I have to say, that some of these stores looked like they were on their last legs. Without the proper staffing to maintain a store, they can start to look pretty rough around the edges, pretty quickly! And I know that they were trying to tell us about their good prices on things (and we did do some buying!), but was Old Navy trying to tell us something with signs that screamed Going, Going?

Amazon was one bright spot on the retail horizon. Again, according to a recent article in the Washington Post:

Online retail giant Amazon.com said yesterday it recorded its "best ever" holiday season this year with a 17 percent increase in orders on its busiest day, bucking the generally grim news coming from retailers, including other e-commerce sites.

I think that given the hell that much of retail is today, it's not surprising that a retailer who uses technology to make it easier for people to buy is going to do well. And, of course, they can have lower prices since they don't have all of the overhead of brick & mortar stores, namely the brick & mortar! They can also better use their staff to help customers, since the delivery of the product is handled elsewhere. We've spoken extensively about this issue in the past, that if stores don't create a really unique and compelling reason for us to walk through the door, it really is easier to shop online. And all of that expensive real estate will simply become a very expensive "web site," where people come to look at things, but they do their actual purchasing online.

Usually, come January, consumers have that January headache, where we get all of those bills from the holidays and we get a headache trying to figure out how to pay for them. This year, I think that we'll see lots of retailers with the headache of trying to figure out how they're going to pay for all of those sale prices they gave us this month. And, clearly they'll be a few that won't survive.

Retailers Look to Capture Night Owls - WSJ.com. (Registration required)

Amazon Hails Strongest Holiday Sales Season Yet - washingtonpost.com.

Retailers hoping for post-Christmas miracle - Small business- msnbc.com.

Small stores face big holiday test - Small business- msnbc.com.

Comments

[Jacki Morie]

I'd like to add an exception to the descriptions above, Dave. I shopped in Sears twice for the holidays, and found there to be lots of really helpful people staffing the store. Some of the lines were a bit long, but that was to be expected two days before Christmas. Two weeks before that I bought a new washing machine, and the salesman spent over an hour with me, looking for just what I wanted, and when it was not available, helping me check features to find something that matched. He then filled out all the rebate forms (3 of them to a total of $375) so that all I had to do was sign and mail them. Several other people were buying large ticket items in the appliance dept. that day, and the salesman said they were doing a good steady business. I was surprised and delighted that my Sears experiences were that positive.