Hope Springs Eternal

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\"\"Well, here we are, right in the middle of the Back-To-School retail season.  Kind of analogous to Hurricane Irene barreling up the east coast, one might describe the retail and consumer situation as being right in the middle of its eye, be-calmed and unsure, waiting for some sense of what lies ahead, hoping that the global economic hurricane will somehow dissipate clearing the way to a sunny second half.

Hoping for a better season than last, it appeared out of the gate that it might be so.  However, now about half way through, the hope is for at least a “par.”  The global economic hurricane intensified over the past month across Europe, exacerbated by indecision on how to deal with the threat of default and recession, and in the US, continued bad numbers on the housing and unemployment front, also exacerbated by indecision, political and financial sclerosis and a lack of leadership.

So, the words most often crossing the lips of our retail leaders are “cautious optimism,” with weight on “cautious.”

Top-line growth strategy continues in “share wars” mode, with selective discounting, some using popular B-T-S items like jeans as loss leaders to build traffic. Price increases to offset inflationary costs is also very selective, largely holding the line on opening price points for basics, but, raising prices for new and/or perceived better valued items consumers will happily dip into the discretionary side of their wallets to snap up.

Bottom-line growth and productivity has actually been the happy recipient of the smarter retailers’ use of technology and the more efficient and effective flow of goods from sourcing and distribution into, and through the stores, with what the consumer wants, where, when and how often they want it.  In other words, superior inventory management and “localization” are paying off big time.

It’s likely that this rather unstable period will drive more online research among young consumers for prices their parents can agree to.  Thus, it’s likely to result in more online sales as well, the growth of which will continue to outpace brick and mortar stores.

The financial part of the economic hurricane and resulting uncertainty will also push back on the big spurt in luxury sales we experienced in the first half of the year.  One only needs to check the “shock and awe” swings in the stock market and the news of massive layoffs among the banks, to understand that even the still enormously wealthy class will nevertheless hold back on buying more baubles they don’t need.

So, will B-T-S end up being a horror show or a cautiously optimistic “par?” Par sounds good to me.  And, what effect on the Holiday season?  Well, it depends on the world’s political and financial leaders and how and what they do when they get back from the Riviera, the Hamptons, Martha’s Vineyard, or from wherever they are.

Irene will have passed through, but I have absolutely no prognosis for the outcome of the global hurricane.  Maybe we should name it “Hope.”  We sure need it.



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