The New York times wrote on July 4th that retailers are discounting at levels never seen before to try to stimulate business. Read the article here.
The article stated that personal savings as a percent of disposable income rose to 5% from .4% in April, meaning that consumer spending hasn’t shifted downward (or the big economic stimulus package in the form of rebate checks went right into savings accounts).
Retailers barely saw an uptick in sales in May due to the rebates checks, except for electronics.
“Kit Yarrow, a consumer psychologist in San Francisco said…that if shoppers splurge this summer, it will most likely be on only one item, versus three or four in the past.”
Merchandise is up to 50% off at Ann Taylor Loft, Banana Republic, J. Crew and the Body Shop among others.
The article goes on to talk about the deep discounting occurring at Department Stores from Bergdorf-Goorman to J.C. Penney’s.
Analysts are predicting a respectable 2-3% growth in June after a -3% growth in May, mainly due to warmer temperatures pushing sales of summer clothing and tightening inventories at retailers.
The home sector of retail is predicted to do better as people spruce up their homes versus buying new ones. But women’s fashion and high-end footwear are expected to suffer.
THE REAL WORLD RETAILING TAKEAWAY
If you think it’s all doom and gloom out there, it’s because it is.
With food costs spiking, the Midwest under water, with gas prices continuing to soar, consumers are opting to spend on necessities like food and getting to and from work. So don’t expect them to spend on unnecessary items, meaning that sales in your store could suffer if you’re in a non-essentials, non-consumables category.
Continue doing what I’ve always recommended: Cut inventory, goose sales but don’t give away the store and continue to email customers about sales, new product lines, etc.
If you’re doing all of that and still tanking, then (and only then), pull the trigger on higher discounts. But do it as a one time only deal, and for a limited time. If you do it more often, you’re going to train your customers to shop only when you’re offering a deal.
How are you making it through?