February 13, 2015
Retailers feeling good about prospects for 2015
While retail casualties such as RadioShack have been grabbing many of the headlines in the early part of 2015, there is plenty of room for optimism when looking ahead to the rest of the year. According to the National Retail Federation, retail industry sales (excluding autos, gas and restaurants) for 2015 will increase 4.1 percent over last year. Non-store sales will improve between seven and 10 percent over 2014.
"The economy appears to finally have gained some real traction and after a somewhat turbulent 2014, we expect to see continued gains in economic activity in the year ahead," said Jack Kleinhenz, NRF’s chief economist, in a statement. "While Americans are benefiting from a pickup in wages and jobs and gains in the U.S. stock market, economic slack has been reduced. We still, however, have a ways to go in order to achieve sustainable economic growth. There are a few wild cards that the retailers will need to keep an eye on, like global economic growth, energy prices and even inflation."
While NRF is predicting a solid 2015 for retailers, the year has gotten off to an unexpectedly slow start. Sales in January (excluding autos, building materials, gas, autos, and restaurants) were up 0.1 percent in January, according to the Commerce Department. Economists were expecting an increase of 0.4 percent.
One of the factors appearing to weigh on retail purchases is the tendency of consumers to put money saved at the pump into their savings rather than spending it in stores. According to Wells Fargo, via USA Today, the average driver saved $67 a month in the fourth quarter as a result of gas prices that fell to an average of $2.23 a gallon.
"It is difficult to understand why individuals are not bumping up their consumption," Wells Fargo senior economist Eugenio Alemán, told USA Today.
BrainTrust
Recent Discussions
Discussion Questions
What are your expectations for the retail industry this year? What factors do you think are wild cards that could interfere with the industry’s continued growth in 2015?
Poll
Fiscal year 2015 is off to the races taking baby steps demonstrating that once again there is little to celebrate. Perhaps the retail market should take time to rekindle celebrations. In years past the market celebrated everything to keep the spark in our part of the economy alive and vibrant. Then came the global economy with its logistics delays along with a sprinkling of negative press and now there is a whole lot less celebrating.
Less to celebrate means fewer sale events and fewer events have coincided with fewer sales. We all could argue for days and days why, and even if, the economy is broken and/or fixable, only to find things as they are, as in not so good. Dusting off a plan that worked and adding some more events may catch on. The United States is far more diverse in population and cultures. We might consider learning and celebrating some new cultural events designed to bring a better awareness of one another along with an enhanced feeling of acceptance among ourselves. Those that wish not to participate should be left to their own. As for the rest of us, celebrating may catch on for the betterment of all.
The economy is good all the time for good retailers. To blame the economy for poor performance is classless and cowardly. There are no wild cards. As long as retailer is doing their job, wild cards don’t exists.
As usual, the NRF is very optimistic (too much so) about a year that has just kicked off, and not with the greatest sales momentum so far. While improving employment numbers and low prices continue to provide tailwinds, there is still not enough evidence that consumers are spending at the rates the NRF suggests. (Usually they hold their optimism for their holiday forecast.)
Shoppers continue to be very selective about where they spend their money: No problem buying the latest iPhone in huge quantities, but this kind of purchase takes customers out of the market for a lot of other goods. So the joy among other electronics, home goods or softlines retailers may be a little more muted than the NRF suggests.
The dominant wild card is what segment of the market represents a retailer’s customer base. We’re still living with a bifurcated consumer base across the country.
Walk certain neighborhoods, and you’re seeing spending like 2005-2006. In others, increased spending is taking place, but it’s taking care of more of the necessities.
Know the merchandise category segments that are moving, who’s buying them or resisting them, and watch/listen to what those consumers on both sides are doing when away from your stores.
The wisdom of the crowd will point out whether a four percent-plus jump is ahead. A good number of retailers are going to be focused on each transaction by taking care of one customer at a time.
In the U.S. specifically, I think there are enough strong economic signs of growth for this year, including record auto sales, housing recovery and major mall traffic in major markets. Of course not all major markets in the U.S. are recovering at the same rate, and outside the U.S. recovery is spotty. However, in areas including the New York/Tri-State Area, Los Angeles, Chicago, San Francisco, etc., I see steady, not huge, but steady growth. One big challenge to real revenue growth is still some level of “deflation” in the marketplace. Many merchants are moving far more tonnage of products sold, however reduced retail pricing and massive discounts deflate the overall revenue, even though more product is being sold.
Does anyone ever post-audit these types of projections? There is no way anyone could know if gas prices will spike again, if another financial shock will occur, if unemployment will increase instead of decrease, if the weather will be better or worse, etc. But yet, those are all drivers that could make this number change by multiple percentage points. It’s easy to make pronouncements, but industry comps just aren’t predictable. Or perhaps, they are really just a gauge of real-time sentiment at NRF.
That said, retailers shouldn’t focus on the uncontrollables anyway. They should focus on what levers they can pull to improve their own comps. They can grow their “innovation funnel” to have radically more business improvement ideas to test. What I predict is: There will be even more talk of increased innovation, with a focus on bringing together the increasingly-integrated physical and digital worlds. And without predicting, I hope we will actually see those tests of truly innovative omni-channel ideas in 2015 and not just the talk.
I just don’t see this celebration among my associates that I have dealings with. The economy is built on a house of cards, and many small businesses are making choices on how to survive a year filled with new mandates, and ACA is on the front burner. Add in new mandates from the USDA, which does nothing to help anyone, plus newer minimum wage hikes, and you have to wonder where all the enthusiasm is coming from. Just got back from the NGA show in Vegas, and I spoke to many retailers who are struggling to figure out how to pay for all the additional costs of healthcare, and the other items I mentioned.
This is serious stuff. as some retailers are actually scaling back hiring to stay under the 50 employee threshold to save money. Is this the way we used to think as business owners? Of course not, but the reality of overwhelming costs has changed the way some of us think. I learned a great deal on social media platforms, and will continue to try to grow my business, as all of us need to do, and optimism must come from within ourselves to create great foods no one else can, and make a handsome profit on it.
Challenges lie ahead, but I always am trying new ways to create not only great foods, but an experience that our customers appreciate when they shop here. Now if it can rise above three degrees here, things will start to look up.
Looking forward to summer here, as it is our 50th year in business, and there will be a celebration for sure.
I don’t know what tea leaves the folks at NRF are reading. I fear it is more wishful thinking and prime-the-pump spin than anything else. There are fewer people working full-time in well-paying jobs than at any time in recent memory. The U.S. State Department reported to the United Nations High Commissioner on Human Rights recently that there were “46.5 million” people on food stamps in the United States last year and that a quarter of all Americans received government “food assistance.” This may give hints to a few reasons “why individuals are not bumping up their consumption.” These are not numbers or an environment that bodes well for a buoyant retail climate outside of the spending of the top percentage of earners, and some older Boomers who may have been able to save some money in the good years had already paid off their houses before the housing bubble and retired into defined benefit pension plans.
The store closings and empty retail space tell the tale. Realistically, what exactly do retailers see there is to be optimistic about in the foreseeable future?
Reading the comments, it seems people are either expecting boom or gloom, with little in between. My own view is that predictions lag results, so the enthusiasm—if that’s the right word for it—is a reflection of the past year more than a forecast of the coming one (semantics notwithstanding).
I think retail could grow by 4.1% this year, but it’s going to take effort from retailers. If consumers are saving on gas, there is extra money floating around that could be spent on goods—but not necessarily. It’ll take a consistent effort to deliver great prices, effective marketing, personalization, and an omnichannel experience. Not taking the time to implement these could hinder retail from reaching that level of growth this year.
Growth will be slow and low. A stock market correction (likely); Euro economic crisis; war—all could cause the retail sector to go from slow and low to no.
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Fiscal year 2015 is off to the races taking baby steps demonstrating that once again there is little to celebrate. Perhaps the retail market should take time to rekindle celebrations. In years past the market celebrated everything to keep the spark in our part of the economy alive and vibrant. Then came the global economy with its logistics delays along with a sprinkling of negative press and now there is a whole lot less celebrating.
Less to celebrate means fewer sale events and fewer events have coincided with fewer sales. We all could argue for days and days why, and even if, the economy is broken and/or fixable, only to find things as they are, as in not so good. Dusting off a plan that worked and adding some more events may catch on. The United States is far more diverse in population and cultures. We might consider learning and celebrating some new cultural events designed to bring a better awareness of one another along with an enhanced feeling of acceptance among ourselves. Those that wish not to participate should be left to their own. As for the rest of us, celebrating may catch on for the betterment of all.
The economy is good all the time for good retailers. To blame the economy for poor performance is classless and cowardly. There are no wild cards. As long as retailer is doing their job, wild cards don’t exists.
As usual, the NRF is very optimistic (too much so) about a year that has just kicked off, and not with the greatest sales momentum so far. While improving employment numbers and low prices continue to provide tailwinds, there is still not enough evidence that consumers are spending at the rates the NRF suggests. (Usually they hold their optimism for their holiday forecast.)
Shoppers continue to be very selective about where they spend their money: No problem buying the latest iPhone in huge quantities, but this kind of purchase takes customers out of the market for a lot of other goods. So the joy among other electronics, home goods or softlines retailers may be a little more muted than the NRF suggests.
The dominant wild card is what segment of the market represents a retailer’s customer base. We’re still living with a bifurcated consumer base across the country.
Walk certain neighborhoods, and you’re seeing spending like 2005-2006. In others, increased spending is taking place, but it’s taking care of more of the necessities.
Know the merchandise category segments that are moving, who’s buying them or resisting them, and watch/listen to what those consumers on both sides are doing when away from your stores.
The wisdom of the crowd will point out whether a four percent-plus jump is ahead. A good number of retailers are going to be focused on each transaction by taking care of one customer at a time.
In the U.S. specifically, I think there are enough strong economic signs of growth for this year, including record auto sales, housing recovery and major mall traffic in major markets. Of course not all major markets in the U.S. are recovering at the same rate, and outside the U.S. recovery is spotty. However, in areas including the New York/Tri-State Area, Los Angeles, Chicago, San Francisco, etc., I see steady, not huge, but steady growth. One big challenge to real revenue growth is still some level of “deflation” in the marketplace. Many merchants are moving far more tonnage of products sold, however reduced retail pricing and massive discounts deflate the overall revenue, even though more product is being sold.
Does anyone ever post-audit these types of projections? There is no way anyone could know if gas prices will spike again, if another financial shock will occur, if unemployment will increase instead of decrease, if the weather will be better or worse, etc. But yet, those are all drivers that could make this number change by multiple percentage points. It’s easy to make pronouncements, but industry comps just aren’t predictable. Or perhaps, they are really just a gauge of real-time sentiment at NRF.
That said, retailers shouldn’t focus on the uncontrollables anyway. They should focus on what levers they can pull to improve their own comps. They can grow their “innovation funnel” to have radically more business improvement ideas to test. What I predict is: There will be even more talk of increased innovation, with a focus on bringing together the increasingly-integrated physical and digital worlds. And without predicting, I hope we will actually see those tests of truly innovative omni-channel ideas in 2015 and not just the talk.
I just don’t see this celebration among my associates that I have dealings with. The economy is built on a house of cards, and many small businesses are making choices on how to survive a year filled with new mandates, and ACA is on the front burner. Add in new mandates from the USDA, which does nothing to help anyone, plus newer minimum wage hikes, and you have to wonder where all the enthusiasm is coming from. Just got back from the NGA show in Vegas, and I spoke to many retailers who are struggling to figure out how to pay for all the additional costs of healthcare, and the other items I mentioned.
This is serious stuff. as some retailers are actually scaling back hiring to stay under the 50 employee threshold to save money. Is this the way we used to think as business owners? Of course not, but the reality of overwhelming costs has changed the way some of us think. I learned a great deal on social media platforms, and will continue to try to grow my business, as all of us need to do, and optimism must come from within ourselves to create great foods no one else can, and make a handsome profit on it.
Challenges lie ahead, but I always am trying new ways to create not only great foods, but an experience that our customers appreciate when they shop here. Now if it can rise above three degrees here, things will start to look up.
Looking forward to summer here, as it is our 50th year in business, and there will be a celebration for sure.
I don’t know what tea leaves the folks at NRF are reading. I fear it is more wishful thinking and prime-the-pump spin than anything else. There are fewer people working full-time in well-paying jobs than at any time in recent memory. The U.S. State Department reported to the United Nations High Commissioner on Human Rights recently that there were “46.5 million” people on food stamps in the United States last year and that a quarter of all Americans received government “food assistance.” This may give hints to a few reasons “why individuals are not bumping up their consumption.” These are not numbers or an environment that bodes well for a buoyant retail climate outside of the spending of the top percentage of earners, and some older Boomers who may have been able to save some money in the good years had already paid off their houses before the housing bubble and retired into defined benefit pension plans.
The store closings and empty retail space tell the tale. Realistically, what exactly do retailers see there is to be optimistic about in the foreseeable future?
Reading the comments, it seems people are either expecting boom or gloom, with little in between. My own view is that predictions lag results, so the enthusiasm—if that’s the right word for it—is a reflection of the past year more than a forecast of the coming one (semantics notwithstanding).
I think retail could grow by 4.1% this year, but it’s going to take effort from retailers. If consumers are saving on gas, there is extra money floating around that could be spent on goods—but not necessarily. It’ll take a consistent effort to deliver great prices, effective marketing, personalization, and an omnichannel experience. Not taking the time to implement these could hinder retail from reaching that level of growth this year.
Growth will be slow and low. A stock market correction (likely); Euro economic crisis; war—all could cause the retail sector to go from slow and low to no.