By Doug Stephens
As holiday and comp-store full year sales are coming in, it appears that at best, the results can be characterized as mixed. Some retailers like Nordstrom and Costco seem to have fared quite well, while others like Target and Victoria’s Secret were not so lucky.
Now of course, speculation as to the cause for the spotty results has already ensued. In the U.S. the finger is being pointed at (among other things) worries over the fiscal cliff deadlock, hurricane Sandy, and even the tragedy in Newtown, Connecticut as a contributing factor for the consumer’s less than robust spending. All of this, some suggest, has conspired to dampen spirits and consequently holiday sales. Frankly, none of these excuses really make much sense.
As for worries over the fiscal cliff – personally I doubt very much that the average man or woman on the street really even understands what the fiscal cliff is, much less how it might affect him or her. It’s a macro-problem for consumers who think in micro terms, where the only thing that matters is what affects them personally and immediately.
Hurricane Sandy? Sure there was likely an impact but it would only explain slacker-than-normal sales in the North East. It certainly wouldn’t have propelled the entire nation into a sales slide.
Lastly the horrible tragedy in Newtown? There’s no doubt that it shook people to their core around the world (and still is), but it still doesn’t explain low holiday spending. In fact, multiple studies have drawn a very clear correlation between trauma and depression and an increase in shopping. Oddly, we often shop to ease pain.
So what really happened? Why such a poor holiday season in retail?
Welcome to Reality
While it’s a bitter pill to swallow, we have to accept the fact that the 30-40 year period prior to 2008 was a highly unusual and largely unrepeatable phase in modern consumerism. It was a period in which we routinely came to expect 5+% year on year increases in consumer spending. Hell, we were disappointed when retail stocks returned anything less than double-digit gains. The math we’re confronted with today however, is that wages for the average American have been stagnant for more than 30 years! Meanwhile, fixed living expenses have been going through the roof. The bottom line is, there’s less discretionary income to go around and to top it all off, there’s less available credit to mask the problem. There’s no IOU to patch the growing gap between shrinking family incomes and the skyrocketing escalation in fixed living expenses. The giddy days of rampant, credit-crazed consumption have come to an end. Throw in the looming spectre of unemployment or perhaps even worse – underemployment and it makes for very tenuous consumer behavior. And this isn’t a blip. What you’re looking at now is the real deal. This is the market, not an aberration of it.
Less But Better
As a consequence of ever tightening budgets, consumers are generally opting for less but at the same time, they’re also looking for better. They are infinitely more conscious, considered and calculated about what they buy and the brands from whom they’re buying. If they’re going to spend, they’re making sure it’s worth it. All of this spells disaster for lousy retailers – and that leads me to the next bitter pill. There are still a ton of lousy retailers out there. We not only have too much retail, we have too much retail that’s undifferentiated, mediocre and just plain forgettable.
The simple truth is that we’ve crossed over into a new era and it’s going to be a painful and potentially perilous transition for any retailer that doesn’t fundamentally understand that. If your business or your brand isn’t remarkable…you’re invisible. There is no well pent-up, excess demand to pull you through and you can’t simply live off the crumbs that fall off the table of brands that are worthy.
It’s also time to stop putting an asterisk beside annual online sales figures like they’re too small a dollar figure to be taken seriously. Sure online is a fraction of total retail but as long as it continues to grow by 10-15 percent per year, as it has been, it’ll be less than a decade before it’s 30 percent of everything we buy. So, to be blunt, if you’re not already getting damn good at selling online, you’re days are numbered.
The silver lining is that as a retailer if you are really worth shopping, you’ll get your fair share and someone else’s too! If you sell products that are unique, offer service that’s memorable or convenience that’s unparalleled (online or off), chances are you’ll not only survive the new era – you’ll thrive in it.
Look for my book, The Retail Revival, in stores February 2013.