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Back-to-school sales drop, and consumers remain cautious going into the holidays
Following an unusually poor back-to-school shopping season, research organizations are providing mixed projections for how sales will do during the holiday season. One suggests holiday shoppers will spend carefully, but a bit more freely than during the recession of the past year.
The back-to-school season, an important period for retailers, fared poorly this year as consumers remained cautious in their spending. Just how cautious is a matter of debate as research organizations came out with differing numbers.
As for the holiday season, a survey suggests consumers will spend carefully, but a bit more freely than they have during the recession of the past year.
Better than anticipated?
One report on August retail sales came from the International Council of Shopping Centers and Goldman Sachs, whose index of retail sales was down 2% from August a year ago.
That was actually fairly good news, as it represented the strongest reading since year-over-year sales were down 1% in September of last year, says Michael P. Niemira, chief economist and director of research of the Shopping Centers Council. “August sales were better than anticipated,” he says. “These sales figures reflect a turning point in the retail cycle, as retailers have been describing the month’s sales as better than expected.”
The Shopping Centers Council had been predicting that August sales would be off by as much as 4% from a year ago.
However, ShopperTrak’s National Retail Sales Estimate, which is based on foot traffic at malls and U.S. Department of Commerce numbers, reports that year-over-year sales of general merchandise fell 5.8% during the last week in August.
Consumers limited their spending to necessities, and many put available dollars into new car purchases, taking advantage of the government trade-in program widely called Cash for Clunkers.
“ShopperTrak’s data supports the findings of many economists who believe the majority of discretionary spending normally allotted for back-to-school items was most likely redirected on auto purchases during the government’s Cash for Clunkers program,” ShopperTrak says.
National Retail Federation economist Rosalind Wells reached a similar conclusion after the NRF reported that August retail sales-excluding spending on cars, gasoline and restaurant meals-were up 0.7% from July, the first gain in six months, though still down 4.3% from a year earlier.
“Shoppers were a bit more comfortable digging into their wallets last month, and retailers are hopeful that we’ve turned a corner,” Wells says of the report.
Spending increases may be on the horizon, based on how consumers responded to the August ShopperScape survey by retail consultants Retail Forward.
“Reinforcing an encouraging trend this year, shoppers’ intentions to spend in the coming months improved dramatically in August,” Retail Forward says, adding:
- 53% said they planned to spend about the same amount in the coming months as they did last year during the same period. Retail Forward reports this is the first time since February 2008 that more than 50% planned to spend as much.
- The percentage of shoppers saying they plan to spend less in the next month reached its lowest point in more than a year. August’s 38% was the lowest since February 2008.
- “The August numbers reinforce a zigzagging trend developing since early 2009, suggesting a declining percentage of shoppers planning to spend less and a growing percentage of shoppers planning to spend about the same compared to the prior year.”
Shoppers, however, have more modest intentions for holiday shopping, Retail Forward says:
- 46% plan to spend about the same as last year.
- 43% plan to spend less than last year.
- Only 6% plan to spend more.
“In the end, shoppers’ early plans for the December holidays are restrained. Over time, however, shoppers continue to give encouraging signs that they are slowly easing their iron grip on their spending plans,” says Frank Badillo, senior economist at Retail Forward.
Promote the sites
The fallout from the economic downturn could lead to as many as 10,000 retail stores closing by the end of 2009, consulting firm Grant Thornton’s Corporate Advisory and Restructuring Services division reported recently. Among survival strategies, the group recommends retailers promote their web sites.
“Buyers are choosing clicks over bricks,” the report says. “Consumers may not be buying much, but online sales have suffered less and, in certain categories, grown more than in-store sales. Retailers are also using social networking sites to expand their business.”
The groups also recommend creating private-label products, stressing green initiatives and creating customer loyalty programs.
“Although there’s high risk in the retail industry, now is the time for companies to fine-tune their business and take advantage of new opportunities,” says Scott Davis, principal of the restructuring group. “The winners will be the disciplined companies investing the time, effort and resources to reexamine their strategies and position themselves for growth.”