Humdrum sales now the norm

Retailers have been going to extraordinary lengths to boost sales and profits. On the day after U.S. Thanksgiving, the so-called Black Friday, the time that is crucial for stores’ promotions it turned out to be only partly successful. Disappointment was evident.

Retailers last autumn were putting out their wares as early as mid-September. Some stores could not wait for that Friday sales event. They have gone nocturnal. Others jumped the gun and opened at midnight Thursday – or even earlier in that evening.

An online employee organized a petition against those disruptive hours, but to no avail. One chain store announced that it would be open for 24 hours during that holiday week.

Still, did those extended hours help sales? For most outlets the best that can be expected are humdrum sales. Online shopping has been gaining in popularity, but yet most retailers are not prospering.

Consumers in North America have not really resumed their usual buying patterns. Most have not recovered from the huge losses incurred in the later part of the previous decade. The virtual collapse at the housing market and the volatile and mostly lower stock market are having a lingering negative effect on consumers’ willingness and ability to spend. The worldwide economic uncertainty is triggering a great deal of consumer caution. The soaring cost of food is further limiting consumers’ desire to spend.

Most shoppers, when they go out to shop, are concentrating on finding low prices. Any trip to retailers will reveal that sales are almost the order of the day. So, as to be expected, many retailers have cancelled plans to expand their operations.

The unwillingness of consumers to shop at their historical rate has had a profound effect. Massive cuts in prices are hurting profit margins there. Consumers are being given a longer period of time to pay for their purchases and retailers are charging no interest on delinquent accounts:

Many of the smaller retailers are using loss leaders, cutting prices to below cost in order to lure customers to buy different items. Others are hoping that online shopping will encourage more shopping. However, the high-end luxury stores are doing well, as those with big incomes have yet to feel squeezed.

As a result of the turmoil in the retailing sector, inventories are being reduced, depressing business activity all along the line.

In view of the destructive effects on household wealth, it will be a long time before consumers’ frugality ends and consumers return to their usual pattern.




Bruce Whitestone