Alf's Articles

'Tis the Time to Ignite That Lost Retail Spark

by Alf Nucifora

I write this column not having seen the results of Big Friday, the day after Thanksgiving and, traditionally, the starter's gun for the mad Christmas retail scramble. But I make a prediction nonetheless... at best, brick and mortar retail sales will match last year's level; in all likelihood, they'll come in lower.

That's a prediction, incidentally, with which the experts concur, one in particular, Candace Corlett, Principal of WSL Strategic Retail, a leading, international retail consulting firm. Corlett believes that Christmas 2000 will see a major letdown for the retail sector. She predicts that sales will be flat versus last year and only then because of significant price increases that most retailers have foisted on the marketplace. Says Corlett, "This will be one of the most boring Christmases that we have ever seen in recent time. There is nothing new this year to excite the buyer imagination."

Aside from Sony's Playstation and Disney's 102 Dalmations, retailers this Christmas lack a serious go-to product, a Pashmina cashmere scarf, a Palm Pilot, a pair of GAP leather pants. Says Corlett, "There's a lack of excitement about anything really new to buy. After all, eight years of booming economy means that most Americans now have enough 'stuff.' Consequently, unless it's really different or really exciting, consumers will not be compelled to buy more."

This retail boredom phenomenon has also been confirmed by the Yankelovich Monitor which has also identified the boredom factor as one of the more significant sociological phenomena confronting the U.S. marketplace in terms of how it buys and how it is/is not entertained.

Insecurity on Main Street

Adding to what are already lower spending and confidence levels vis-a-vis 1999, uncontrollable environmental factors are adding to consumer angst. An erratic stockmarket, increases in oil prices, and the never-ending election process, all contribute to a general concern about things not being right in the world. Scratch a consumer and you'll hear growing concern about the uncertainty, vulnerability and potential volatility of what's coming in 2001. James Carville had it right. It's always the economy, stupid!

To add insult to injury, the Internet won't make it easy on the traditional storefront retailer. Jupiter Research predicts that 35 million U.S. consumers will purchase gifts on-line this Christmas compared with 20 million last year. That equates to a projected $11.6 billion in on-line sales in December 2000, up from $7 billion in 1999. And while on-line sales of books, toys and music will lead the pack, Jupiter predicts that a surprisingly large number of shoppers will purchase clothing and/or shoes on-line, product categories that have traditionally remained the sole purview of the department store and specialty retailer.

When Fear Prevails, Lower the Price!

Fear seems to have brought out the worst in the traditional retailer. In normal times, it takes a minimum 20% discount to lure the customer into the store. This year, retailers are going overboard to give it away. For example, Toys-R-Us offered its "Big Toy Book" with $1400 worth of savings and free shipping for purchases of $100 or more made by November 22 at its website. Old Navy is kicking-back a $10 gift card on a $50 purchase. In fact, 20-25 % has now become the baseline discount, the point of entry for most retailers. And this year it's being supplanted by an explosion of Sales events and big bonus coupon offers, traditionally held in reserve until the third week of December but this year, for the first time, seeing light before and during the Thanksgiving kick-off period. Christmas 2000 will be remembered not only for its rampant discounting, but for the fact that it started so early in the piece.

For department stores, it means big trouble. Product parity, crammed in-store merchandising, brand offerings with no definable point-of-difference, as well as knee-jerk discounting, all spell depleted sales as well as reduced profit margins for the traditional department store flags. Even the more successful operators are beefing up their spending levels to encourage early shopping. As an example, every week since late September, a Neiman Marcus catalog (sometimes several) has arrived in the mail. This includes not only the renowned Christmas Book, but also numerous sales and specialized gift catalogs for men, women and the home.

While some specialty retailers like the GAP will feel the heat this year (nothing new or hot to talk about), others like Victoria's Secret, Bath & Body Works and main street boutiques will see the opportunity and jump at it. Ditto for the small business retailer. Consumers have spoken and they've told us loud and clear that they want unique product, better customer service and a more amiable and conducive shopping environment. The large department stores and galactic retail chains lost the desire, skill and good sense to address those needs some time ago. Their death spiral has been in the making for a decade or more. Conversely, opportunity now prevails for the small business retailer who has the intelligence to acknowledge those consumer needs and respond accordingly. Agility, after all, is one of the benchmarks of the small business environment. More importantly, the basic consumer inclination to buy is still there. They just need the inducement. Who better to provide it than America's small business class.