January 15, 2015
NRF to retail nation: R-E-L-A-X
Earlier this year after the Green Bay Packers got off to a 1-2 start to the season, the team’s quarterback, Aaron Rodgers, went on the radio to tell Packer fans everywhere to R-E-L-A-X. This week, Mr. Rodgers’ team will play in the NFC Championship game, one victory away from the Super Bowl. Yesterday, the National Retail Federation (NRF) had its own R-E-L-A-X moment following news that retail sales dipped in December. Here’s hoping the retail industry goes on a run like the Packers through the rest of 2015.
Yesterday, the Commerce Department announced sales for December were down 0.9 percent compared to November. Much of the drop is being attributed to plummeting prices at gas stations across the U.S.
While acknowledging it also saw a dip in December, NRF pointed out that sales for the entire holiday period were up four percent, the highest level since 2011. The sales figures for the holidays were roughly in line with the 4.1 percent predicted by the trade group.
"We remain positive about the future and expect to see consumers continue to benefit from the extra income gained from an improved job market and the dramatic fall in gas prices," said Jack Kleinhenz, NRF chief economist, in a statement.
"There is every reason to believe that we have moved well beyond the days of consumer pessimism and that the trajectory for retailers continues to point up," added Matthew Shay, president and CEO of the association.
An informal survey of attendees at this week’s NRF Big Show in New York found that 97 percent were more optimistic about the industry’s prospects for 2015.
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Discussion Questions
Does the reported drop in retail sales for December give you pause for concern or do you agree with NRF that the outlook is bright for the industry in 2015? What factors are most likely to help or hurt retail sales in 2015?
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Sorry, I didn’t read a drop in retail sales. According to the WSJ here yesterday, “Retail spending excluding gasoline purchases rose 5.3% in December from a year earlier, far stronger than the annual gain of 4.1% in December 2013. That was in line with retailers’ reports of a better holiday season and the view that the U.S. economy steadily improved last year.”
Did I miss something?
By the way, it would have been nice if NRF had taken R-E-L-A-X advice after their 11 percent drop in sales survey was used as fact after Thanksgiving.
I do think the outlook is bright for the same reason it took a dive in December. Gas prices are low. At some point soon, the cost of transporting goods will go down. That means one or two things: Prices will go down (not too likely) and/or profits will go up. As profits go up, so does the retail industry enjoy better times, higher stock prices, more jobs and the industry has a decent rebound for the rest of the year. Now if the gas prices go back up, all bets are off!
As stated in the article, most of the drop in sales is attributable to plummeting gas prices. When combined with the extensive promotions that retailers undertook in November, it’s no surprise that overall sales fell and that retail sales dipped in December. The overall picture was positive, with a four percent increase in total holiday sales.
Unemployment may be down, but wages have been stagnant-to-down for years. Without additional funds, consumers are still cautious about spending.
If the employment numbers stay low and employers are forced to increase wages to secure necessary workers, and if gas prices remain low, look for consumer spending to increase in 2015.
I am very optimistic about the retail industry in 2015. I believe that lower gas prices will be key in encouraging shoppers to buy more and shop more frequently as well as lowering the price tag for shipping goods on the supplier side. However, I think what is inspiring the most optimism is the amount of innovation and experimentation happening in our industry right now. It seems that everyone has a renewed energy to improve the shopper experience and that is something that we will see pay off throughout the year.
Good for the NRF. Add to their point about Q4 strength: The extended length of Black Friday sales at most major retailers and the supply chain bottleneck at West Coast ports where shiploads of inventory originally intended for holiday sales still sit. Aside from food and some big ticket retailers, don’t expect January to be good either.
December month-to-month numbers are concerning because they confounded common arguments. Lower in-store sales caused by weather were not offset by higher online sales (they dropped too). Lower gasoline spending did not get re-channeled to other retail segments (partially explained by a drop in average hourly earnings).
But, as Bob notes, the more important year-over-year numbers tell a promising story. They were up 3.2 percent over Dec 2013. Overall holiday sales are the best since 2011, according to the NRF.
Other key drivers are breaking in the right direction. Core retail sales stripping out gasoline and auto were up 0.4 percent. These correlate more closely with GDP. The percent of people calling the economy “fair or poor” dropped from 73.2 percent in November to 68.7 percent in December, so says Chain Store Guide. The Fed may now be likely to raise interest rates in June, which would have been a drag on economic growth.
Unlike the Packers prospects for Sunday, this retail data should NOT create cause for concern 2015.
There is no technology breakthrough in 2015 not available back in 2013, 2014 or even 2011. There is going to be a great digital divide between retailers on top of retail technology and retailers sticking to traditional retailing methods.
We are witnessing the women’s apparel sector crumbling thanks to yoga pants and stretch pants and more trends like this are going to occur quickly and retailers will need to adapt quickly. Big data is necessary to identify these types of trends and patterns to react.
Discounting versus premium in pricing will still be a challenge. Retailers that cannot create premium experiences will be forced into the discounting arena which is another 2015 challenge.
Technology does not solve problems, it helps motivated and determine entities reach the solution easier. Click-and-collect, beacons, geo-fencing and mobile payments are not going to save or rescue a retailer and many retailers are going to have to shore up their core values of productive employees and processes before being able to use technology to deliver solutions.
So while 2015 appear optimistic for some, there is real work to be done to make it so in retailing.
Why wouldn’t you be optimistic for 2015? There’s so much opportunity for improving results every day. Blaming the economy, gas prices, the government or even the weather is a loser’s game. Anyone getting caught up in the always predictable, always negative media game doesn’t really see what’s really going on. More retailers are winning than are losing. And there are lots and lots of consumers who are ready and willing to spend money in your store, so long as you’re on your game. Time to stop whining and step up.
The economy continues to slowly improve, but one wonders how much the damage that the great recession did to net worth for the 40-and-older segment will result in any increase in household income to savings, not spending. Continued increases in health care costs will impact middle income earners either through increased monthly premiums or reduced raises as employer-pay companies struggle to contain net payroll costs. On a positive note, lower gas prices help a large segment of the economy—but not universally. It is likely to be just a modest year. And it might not even be that good for the brick-and-mortar stores as spending increases might be more than offset by improvements in online share. So hope for a great year but plan for an average one.
Total retail business is increasing and will continue with the support of lower gas prices. Consumers are just beginning to be sold on the idea the economy is getting better. Until employers start passing out raises, it will be a slow, weak acceptance. The middle class, which does the greatest consumer purchasing, continues to be hammered now by medical insurance costs and lack of full-time jobs. Terrorism on American shores will greatly reduce retail sales. Fixing Obamacare by lowing costs will help retail sales.
Lower gas prices caused the drop in spending, not the consumer. If you take out the gas prices, spending is up. So, what is the concern? The trend is heading the right direction.
As the economy stays strong, the overall sales should remain strong. To the individual retailer, what will hurt them is competitive issues, poor marketing and poor customer service—and the retailer has a great deal of control of those.
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Sorry, I didn’t read a drop in retail sales. According to the WSJ here yesterday, “Retail spending excluding gasoline purchases rose 5.3% in December from a year earlier, far stronger than the annual gain of 4.1% in December 2013. That was in line with retailers’ reports of a better holiday season and the view that the U.S. economy steadily improved last year.”
Did I miss something?
By the way, it would have been nice if NRF had taken R-E-L-A-X advice after their 11 percent drop in sales survey was used as fact after Thanksgiving.
I do think the outlook is bright for the same reason it took a dive in December. Gas prices are low. At some point soon, the cost of transporting goods will go down. That means one or two things: Prices will go down (not too likely) and/or profits will go up. As profits go up, so does the retail industry enjoy better times, higher stock prices, more jobs and the industry has a decent rebound for the rest of the year. Now if the gas prices go back up, all bets are off!
As stated in the article, most of the drop in sales is attributable to plummeting gas prices. When combined with the extensive promotions that retailers undertook in November, it’s no surprise that overall sales fell and that retail sales dipped in December. The overall picture was positive, with a four percent increase in total holiday sales.
Unemployment may be down, but wages have been stagnant-to-down for years. Without additional funds, consumers are still cautious about spending.
If the employment numbers stay low and employers are forced to increase wages to secure necessary workers, and if gas prices remain low, look for consumer spending to increase in 2015.
I am very optimistic about the retail industry in 2015. I believe that lower gas prices will be key in encouraging shoppers to buy more and shop more frequently as well as lowering the price tag for shipping goods on the supplier side. However, I think what is inspiring the most optimism is the amount of innovation and experimentation happening in our industry right now. It seems that everyone has a renewed energy to improve the shopper experience and that is something that we will see pay off throughout the year.
Good for the NRF. Add to their point about Q4 strength: The extended length of Black Friday sales at most major retailers and the supply chain bottleneck at West Coast ports where shiploads of inventory originally intended for holiday sales still sit. Aside from food and some big ticket retailers, don’t expect January to be good either.
December month-to-month numbers are concerning because they confounded common arguments. Lower in-store sales caused by weather were not offset by higher online sales (they dropped too). Lower gasoline spending did not get re-channeled to other retail segments (partially explained by a drop in average hourly earnings).
But, as Bob notes, the more important year-over-year numbers tell a promising story. They were up 3.2 percent over Dec 2013. Overall holiday sales are the best since 2011, according to the NRF.
Other key drivers are breaking in the right direction. Core retail sales stripping out gasoline and auto were up 0.4 percent. These correlate more closely with GDP. The percent of people calling the economy “fair or poor” dropped from 73.2 percent in November to 68.7 percent in December, so says Chain Store Guide. The Fed may now be likely to raise interest rates in June, which would have been a drag on economic growth.
Unlike the Packers prospects for Sunday, this retail data should NOT create cause for concern 2015.
There is no technology breakthrough in 2015 not available back in 2013, 2014 or even 2011. There is going to be a great digital divide between retailers on top of retail technology and retailers sticking to traditional retailing methods.
We are witnessing the women’s apparel sector crumbling thanks to yoga pants and stretch pants and more trends like this are going to occur quickly and retailers will need to adapt quickly. Big data is necessary to identify these types of trends and patterns to react.
Discounting versus premium in pricing will still be a challenge. Retailers that cannot create premium experiences will be forced into the discounting arena which is another 2015 challenge.
Technology does not solve problems, it helps motivated and determine entities reach the solution easier. Click-and-collect, beacons, geo-fencing and mobile payments are not going to save or rescue a retailer and many retailers are going to have to shore up their core values of productive employees and processes before being able to use technology to deliver solutions.
So while 2015 appear optimistic for some, there is real work to be done to make it so in retailing.
Why wouldn’t you be optimistic for 2015? There’s so much opportunity for improving results every day. Blaming the economy, gas prices, the government or even the weather is a loser’s game. Anyone getting caught up in the always predictable, always negative media game doesn’t really see what’s really going on. More retailers are winning than are losing. And there are lots and lots of consumers who are ready and willing to spend money in your store, so long as you’re on your game. Time to stop whining and step up.
The economy continues to slowly improve, but one wonders how much the damage that the great recession did to net worth for the 40-and-older segment will result in any increase in household income to savings, not spending. Continued increases in health care costs will impact middle income earners either through increased monthly premiums or reduced raises as employer-pay companies struggle to contain net payroll costs. On a positive note, lower gas prices help a large segment of the economy—but not universally. It is likely to be just a modest year. And it might not even be that good for the brick-and-mortar stores as spending increases might be more than offset by improvements in online share. So hope for a great year but plan for an average one.
Total retail business is increasing and will continue with the support of lower gas prices. Consumers are just beginning to be sold on the idea the economy is getting better. Until employers start passing out raises, it will be a slow, weak acceptance. The middle class, which does the greatest consumer purchasing, continues to be hammered now by medical insurance costs and lack of full-time jobs. Terrorism on American shores will greatly reduce retail sales. Fixing Obamacare by lowing costs will help retail sales.
Lower gas prices caused the drop in spending, not the consumer. If you take out the gas prices, spending is up. So, what is the concern? The trend is heading the right direction.
As the economy stays strong, the overall sales should remain strong. To the individual retailer, what will hurt them is competitive issues, poor marketing and poor customer service—and the retailer has a great deal of control of those.