StORES Magazine - August 2007 - (Page 90)

LOEB RETAIL LETTER Copyright 2007 by Loeb Associates Inc. Used by permission. Scanning the Retail Environment BY WALTER F. LOEB I am very sanguine about the near-term outlook for most major retailers. Business has been below expectations in the past few months, and companies ranging from WalMart to Macy’s (formerly Federated Department Stores) have adopted more promotional stances in an effort to jump-start consumer interest. Walter F. Loeb is a New Yorkbased consultant and member of the NRF board of directors whose newsletter is published monthly in STORES. Macy’s will offer more coupons in its sale advertising, while Wal-Mart will concentrate on lower-priced, value-packed merchandise. At the same time, WalMart has announced a reduction in store openings. The company has added new stores at a rate of 8 percent annually over the past few years; this has been scaled back to 6 percent for fiscal 2007, and I expect it will decelerate to 4 to 5 percent in the next two years. Wal-Mart will concentrate on remodel- Avoiding impulse buying While luxury goods are selling well, the middle- and lower-income consumer is not spending except to meet immediate needs, bypassing impulse items and postponing as many purchases as long as she can. That means that the back-to school period will be more promotional, with more sales and value events across discount, department and specialty stores. There are myriad reasons for the lack of consumer have caused unplanned inventory accumulation. Markdowns aren’t necessarily bad; they constantly refresh the merchandise that is offered to customers. Heavy, unplanned markdowns, however, erode profits and signal consumer apathy. Extended season It is likely that consumers will continue to buy for major occasions and festivities – especially gifts for Christmas and Hanukah: these are emotional times THE REDUCTION OF STORE OPENINGS HAS AN EFFECT ON ALL SUPPLIERS, PARTICULARLY IN THE CONSUMABLES AREA; THEY WILL HAVE TO ADJUST TO A REDUCTION OF INCREMENTAL ORDERS ing stores, and management hopes to generate higher cash flow in order to buy back shares. The reduction of store openings has an effect on all suppliers, particularly in the consumables area; they will have to adjust to a reduction of incremental orders. Some of the cutbacks in new space can be made up through intensified promotions and better in-stock positions. spending. Gasoline prices are at or near historic highs, impacting the family budget. Inflation also is on the rise; home sales have dropped, and with it home values, so that the “wealth” factor is no longer buoying the consumer’s mood. And unemployment is on the rise, adding another degree of uncertainty. Some stores are taking unexpected markdowns, since lower-than-anticipated sales that generate a buying frenzy. In the past few years, however, the holiday buying season has spread into January and February, since many people give store gift cards – leaving the choice of the actual gift merchandise to the recipient. I estimate that overall retail sales will increase 3.7 percent for the full year, with soft goods (4.5 percent) outperforming hardlines (2.4 percent). WWW.STORES.ORG 90 STORES / AUGUST 2007 http://WWW.STORES.ORG

Table of Contents Feed for the Digital Edition of StORES Magazine - August 2007

Contents Executive Editor's Page President's Page Upfront NRF News Retail People Concept2Watch Supermarkets Cover Story Online Marketing In-Store Marketing RFID Data Management Payment Systems Software Loss Prevention E-Commerce Risk Management Communications Loyalty Marketing Human Resources Mobile Commerce Loeb Retail Letter Arts Update Point of View Advertising Index Retail Industry Calendar

StORES Magazine - August 2007

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.