Thursday, January 8, 2009

Hey, everything's for sale.

Interestingly, the USA Today is reporting that Walmart's same store sales increase was half of what it projected.

Everyone else sucked.

But...this is sales, not profits.

I pose a challenge. Either they had huge "DISCOUNT SALES" which should impact heavily on the bottom line, or they had advertisements and promotions for huge "DISCOUNT SALES" but really, it was all a sham, and their profits decrease is similar to their sales decrease.

Either way, it can't be good news for the big chainstores.

They either aren't making money, or they lose all credibility.

I think it will mostly be the latter; and that they don't care; that they think we won't notice....

But we have been noticing, and I think that why everyone waits for the last three days before Christmas to buy to cut through all the hype; that we don't believe in "SALES" anymore, that we think it's all a big game.

For instance, if half the store is 50% off, and sales are down, how the hell do they report 'earning' down only a few percentage points? I call bullshit. Designed from the beginning, let's make a deal with a Chinese factory and produce cheap crap we can mark down where we still make money bullshit.

So they either play games and manipulate, or they lose money and go out of business. Some will chose the suicidal competition route, poor souls.

I can tell you from my sport card experience, that once suicidal competition and price diving takes place, it NEVER COMES BACK. The business can die, but the consumer still thinks he needs a deal. Ask car manufacturers about 'rebates'. Ask airlines how many full price tickets they sell.

And it's not just the chain stores who are losing credibility. If you have a small store, and you have a 50, 70, 90% off SALES!! for months on end, and you come out the other side without going out of business; the consumer isn't stupid. He knows that you can't take 90% your entire store and stay in business -- unless your prices were so damn high in the first place that you were gouging.

And the consumer needs to understand that he will also be a loser in this transaction.
Surviving retailers will figure out a way to get their margins to survive, the consumer will just have to try to figure it out. There will be probably less inventory and selection. Less innovation and price value.

So go ahead.

Demand cheap stuff.

Keep demanding cheap stuff.

Guess what?

You'll get CHEAP STUFF!!!!!!

And that just sets up a world where no one will buy ANYTHING at full price, and the retailers -- knowing this -- set the price higher in the first place, and the consumer -- knowing this -- waits for prices to drop even further.

Oh what a tangled web we weave.

Here' an article that sort of speaks to the point: from WTOP.com. I've highlighted some of the article in bold.

By ANNE D'INNOCENZIO
AP Retail Writer

NEW YORK (AP) - Shoppers are getting used to those 75 percent off sale signs, and that's bad news for merchants who worry they will also have to quickly slash prices on spring goods to attract customers.

Anxieties about how rampant discounts have affected shoppers' psyches and stores' profits are running high ahead of expected dismal December sales figures on Thursday. The holiday season is anticipated to be the worst in decades.

Already, retailers including Bebe Stores Inc. and J.Crew Group Inc. are cutting prices on selected spring styles to lure sale-savvy shoppers.

"It is a vicious cycle that no one wants to continue," said Gilbert Harrison, chairman of Financo Inc., an investment banking firm specializing in retailing. The discounts will be a key topic at Financo's annual dinner on Monday for retail chief executives.

In addition, retailers expect competition from a rise in liquidation sales _ the fallout from the horrible holiday period.

Merchants struggling to clear out mounds of deeply discounted coats and sweaters are wondering how they are going to get nervous shoppers to splurge on new spring products.

The deep price cuts are making shoppers question the true value of items. If they can get $200 jeans at 60 percent off, will they be willing to pay the original price next fall?

"Our sense of what is fair and what is a good deal has changed," said Michal Ann Strahilevitz, professor of marketing at the Golden Gate University's Ageno School of Business. She said that a sale has to be at least 70 percent off to be considered a bargain now.

Marcia Layton Turner, a mother of two from Rochester, N.Y., recently walked away from an outfit that she spotted at a local Kohl's store that was 50 percent off.

"Forty to 50 percent used to excite me," the 43-year-old writer said. "Now, I want at least 70 percent." Turner says she has taken advantage of 75 percent discounts on children's clothes in recent weeks and is willing to wait to get the same type of deals in the coming months.

Consumers across the spectrum have been holding back.

Overall sales of apparel fell 17.3 percent from Nov. 30 through Jan. 3, while footwear sales dropped 12 percent compared to the same period a year ago, according to figures released Wednesday by SpendingPulse, a data service provided by MasterCard Advisors that estimates U.S. retail sales across all payment forms including cash and checks.

Sales of electronics and appliances dropped 21.4 percent, while luxury goods suffered a 27.6 percent drop. Online sales rose 4.6 percent.

Fourth-quarter profits are likely to decline more than 19 percent, said Ken Perkins, president of research company RetailMetrics LLC. Excluding Wal-Mart Stores Inc., one of the few bright spots, he said the drop is expected to reach almost 28 percent.

Perkins predicts that profits will keep falling into the first quarter, projecting an 11 percent drop; excluding Wal-Mart, that figure is likely to fall more than 17 percent.

The financial meltdown in September that led to an abrupt halt in spending came too late for merchants to dramatically adjust spring inventories. Many stores order goods four to seven months in advance.

And while spring inventories are estimated to be down as much as 30 percent from year-ago levels, many analysts say that inventories should be down even more. Barclays Capital analyst Jeff Black believes it will take at least until the back-to-school season to get inventories in line with consumer demand, and even then stores will still face the challenge of weaning shoppers away from deals.

For those shoppers who could still load up on deeply discounted merchandise, the last few weeks have been paradise. Even before the Thanksgiving weekend, the traditional start of the holiday shopping season, Saks Fifth Avenue marked down shoes by 70 percent.

But earlier deals look measly compared with some current offers as merchants try to get rid of their holiday products by the end of the month. The upscale DKNY store on New York's Madison Avenue is plastered with a sign proclaiming "Up to 90 percent off."

As retailers work to clear out old merchandise, analysts say many are trying to hold back on discounting new winter and spring items. Dan de Grandpre, editor-in-chief of dealnews.com, said he is seeing more bundling deals _ a flat-panel TV that comes with a free Blu-ray system, for example.

But many doubt that such strategies will work and predict early discounts on spring goods. The signs are already there. Bebe has cut certain spring sweaters by 25 percent, while J.Crew has marked some spring items anywhere from 25 to 40 percent off, according to Amy Wilcox Noblin, an analyst at PaliCapital Inc.

It will be years before shoppers are going to be enticed by discounts of less than 50 percent, said C. Britt Beemer, chairman of America's Research Group.

Traditional stores have also had to dump more excess goods at off-price retailers like TJ Maxx, which reduce prices more, said Marshal Cohen, chief industry analyst at market research firm NPD Group Inc.

But a bigger problem is liquidation sales at stores that are either closing specific locations or shutting down the entire business.

Going-out-of-business sales at KB Toys and Linens 'N Things put pressure on other retailers even before Christmas, and analysts expect competition to get fiercer amid a likely spike in bankruptcy filings.

James Schaye, president and CEO of Hudson Capital Partners LLC., which has overseen liquidations of Mervyns LLC, Tweeter Home Entertainment Group Inc. and Steve & Barry's, estimated that his company liquidated about $3 billion in merchandise in the October through December period, compared with about $400 million a year ago.

5 comments:

RDC said...

It is always fun watching how you rant against chain stores.

Just as with small stores, some will fail, some will succeed. All will be impacted in a recession. All may have to adjust to a different level of business going forward than what they have experienced over the past few years.

Those that adjust will be successful , those that don't will fail.

Far more small businesses will fail then chain stores will be shutdown.

Duncan McGeary said...

Well, this was meant as a rant against mindless and/or manipulative price cutting.

Whether by the big stores or the little.

The big stores are more noticeble, but the small stores are no less guilty.

Duncan McGeary said...

The consumer is like a very smart mongrel dog. That's a compliment.
He will figure you out, but he will also do what you train him to do.

BilboBend said...

Far more small businesses will fail then [than] chain stores will be shutdown.

*

That's NOT how it works RDC, perhaps on some kind of DOLLAR-VOLUME there will be more BIG, than small. But for the little guy 'small' is secure.

But here's the facts. A guy like dunc can go so lean that he fires everyone, pays no payroll taxes, and lives in his shop, his shop survives, he's used to making min-wage. He can always trade product for food, ... barter.

The BIG BOX must have volume, and needs 100's of warm-bodies for every big-box, if an individual box doesn't meet a volume $$$ the BIG-BOX BOSS-HOGG closes the doors on that box.

The little guy has no choice, he keeps the store open, just him, working 12hr/day, 7 days a week, and weathers the storm.

Guess what he has a job, all the big-box people just got laid off. The big-box sits empty. People start coming to the small store, cuz all the big boxes closed.

RDC is a big-box man, and has not a damn idea of small biz, so I just had to add my two cents. The BIG box took over cuz of easy wall-st money, built on fraud, ... Game-Over.

We just had a boom where DUMB investors allowed BIG-BOX to over-build in lieu of profit, and now it all implodes and once again small-box re-invents itself.

Who would have guessed.

Trouble of course is MOST people are too self-centered to live like Dunc, but see he'll survive cuz he already drives an old car, and eats at home. Dunc will never have to draw un-employment, but virtually everyone else will.

Eventually the INVESTORS pull the plug on BIG-BOX BOSS-HOGG and they commit suicide.

Most of our small biz that sell 'useful' shit ( hopefully dunc fixes that ) survive, the big boxes need a HUGE volume of $$$ to stay open, and its NOT going to be there.

RDC said...

No the reality is there will be far more small business fail then chain stores shutdown. But then againt that is to be expected because there are far more small businesses. For every chain store which shuts in a town, you will have atleast 20 small businesses go under. Just look around Bend at the number of small, individual business which have shut down and the number of large chain stores which have shut down.

A big chain closing a store is much more visible, just as a big layoof by a major compnay is more visible, but you lose more small businesses, just as you lose more small business jobs.