STORES Magazine - February 2009 - (Page 59)

CONSIDER THIS / LOEB RETAIL LETTER Copyright 2009 by Loeb Associates Inc. Used by permission. Can We Reverse Markdown Mania? BY WALTER LOEB The fourth quarter of 2008 was terrible for virtually every retailer in the United States. Sales were below plan; competitors marked down merchandise as it was received, and even regular markdowns often did not produce the desired results. Earnings were disappointing since operating costs remained at an unsustainable high level. Retailers tried to attract With that in mind, here are some thoughts in anticipation of customers to their stores by an economy that will revive under the aura of new presioffering extra incentives; the dential leadership and the implementation of less restricInternet was full of extra distive credit facilities. counts and free deliveries, Retailers must be prepared for that moment when the and the customer benefited economy has turned and when the sales momentum of (for the moment) by getting regularly priced merchandise will increase. It is likely that great values that, in some the inflection point will be very profitable, since inventories cases, may have been will be kept in very tight control and physical expansion of below the cost of the merstores and renovations will be at a minimum. Recovery of chandise. sales momentum can be measured by how fashion sales Now retailers have preare increasing. pared for the first half of 2009 by reducing inventoWalter F. Loeb is a New YorkControl in 2009 ries and lowering expectabased consultant and member Retailers will have to pull back from their promotional adtions. There will be more vertising. Until last year, there was a concerted effort by of the NRF board of directors sales and many efforts to most major retailers to cut back on sales promotions. To whose newsletter is published maintain consumer interest heap coupons on top of sales through newspaper advertismonthly in STORES. through traffic-building mering and direct mail may have been necessary in 2008, but chandise promotions. Remust be curtailed this year. tailers want to keep sales at a reasonable level (it will at Offers of free shipping, extra discounts and other incenleast pay for some of the fixed overhead), yet I expect that tives must have fallen on deaf ears: The consumer just did the first half of the year will remain unprofitable. not react, and in the future she will have to be convinced Retailers have to be pragmatic: The outlook is bleak, but that there is some truth to the sales hype. they must continue to buy merchandise for Right now the operaeach new season — renew their assorttive word is “control” – ment — in order to remain a destination control of inventory, Conservative planning and effective for shoppers. control of associates’ I am worried that the plethora of sales hours, control of exexecution will be the best ways has caused the American consumer to get penses, control of opto remain a profitable organization used to these value offerings. She almost erating costs. Some expects it now, and will not shop unless people are looking at she has the incentive of exceptional value. the structure of their In the past it took several years for the industry to break organizations in order to cut back; others are relying too the magical sales spell, and some stores never recovered. much on their vendors to fill shelves at a moment’s notice if How will retailers be able to break this spell in the future? the sales momentum becomes more favorable. I believe that conservative planning and effective execution will be the best ways to remain a profitable organization. Economic revival I am an optimist: I believe that consumers have pent-up Next month: How operating costs can be reduced in this demand and are looking for new fashions for themselves new economic environment. and their homes — something to help generate a smile. WWW.STORES.ORG STORES / FEBRUARY 2009 59 http://WWW.STORES.ORG

Table of Contents Feed for the Digital Edition of STORES Magazine - February 2009

STORES Magazine - February 2009 Contents Executive Editor's Page President's Page Are You a Pusher or a Puller? What Shoppers Think Online Retail Satisfaction 10 Things You May Have Missed Numbers Worth Counting Full Price/Markdown Retail People Cover Story - Something’s Got to Give First Look Concept2Watch Online Partners Merchandising Sustainability Inventory Systems Drug Store Systems Business Intelligence Inventory Managment Online Marketing Supply Chain - Better Data, Better Decisions Returns Management - Identifying Fraud Data Security - Securing Intimate Data Anti-Shoplifting - Mall of Shame? Risk Management - Securing Consumer Confidence Loeb Retail letter ARTS Update Point of View NRF News Retail Crossword Retail Industry Calendar End Cap

STORES Magazine - February 2009

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