LETTERS TO KAREN: CAN WE WEATHER RETAIL’S PERFECT STORM?
By Nancy Gold
As Sho Chandra’s wrote for Bloomberg Business News on January 15, 2016, in an article entitled “Retail Sales in U.S. Decrease to End Weakest Year Since 2009.”
“The slowdown, including electronics stores, clothing merchants and grocers, indicates Americans probably preferred to sock away the savings from cheaper fuel instead of splurging during the holiday season. While hiring has been robust in recent months, faster wage gains remain elusive, one reason household spending may have a tougher time accelerating as the New Year gets under way.”
I think there’s more to it.
The King’s Collar Shirtmakers is a privately owned company, representative of the many small businesses that depend on a fair return for the time, effort and inventory needed to keep their doors open. I serve as CEO of the company, and for almost 40 years, I’ve witnessed the ups and downs of many business cycles. While retailers continue to set goals for 2016, I suggest that we become mindful of the outside influences that may alter our expectations, and perhaps take the steps that will provide a softer landing in 2016.
Indeed, I’m suggesting “a perfect storm” occurred – one that involves weather, excess sales, and especially politics – that came together and flattened retail’s expectations last year. On the east coast, January and February of 2015 were so brutally cold that few thought about shopping, and the last quarter, which included holiday sales, was the warmest in recent history. As a result, five months of the shopping season were compromised.
Moreover, in compensating for a soft first quarter, inventories were increased for a projected strong holiday season. But because of the weather-related issues that impacted its critical last quarter, shelves remained stocked throughout December, Many businesses remained in the red throughout 2015 and took that position into 2016, with outerwear inventories leading the losses.
Secondly, in recent years, it’s become almost impossible to establish a true cost when much of the profit is now deeply discounted. While sales originated as a way to drive business through traditionally slow periods, we now see countless sales, In addition, as online shopping started to bite heavily into the profits of brick and mortar locations, more sales were added to help compensate for the loss of cash flow. Sales are now a daily and monthly occurrence, and it’s become more difficult to establish consistent pricing.
Mortimer Levitt, my mentor and the founder of The Custom Shop, offered only two sales per year, one in July and one in February, and it was handled as a 10% letter to clients on record. The company’s only advertising was a small notice in the Wall Street Journal during sale months. Mr. Levitt never saw the value in spending hard dollars to advertise, and because sales happened so rarely, business was always brisk for these special promotions. Sale time was always hectic and fun, but now there’s no panache attached to it. There’s no longer instant gratification for a desired object when people know they can eventually buy it at a discounted price.
Sales are important, but small businesses need to be supported at non-sale costs and many have already been unable to survive this pricing dilemma. Sales may move some money around, but they don’t include the profit line that a small business requires in order to stay viable.
Finally, I posit that the final blow for 2015 was the start of the political primaries. As someone who has tracked this timing for almost 40 years, I’ve noted that Presidential elections greatly impact our retail environment. While we ride out the tenure of our elected officials, we don’t know who will be leading us in the years ahead, nor how our newly elected leadership will affect our life view. This uncertainly creates a hesitancy, and this hesitancy colors the landscape of our economy. The fear is real, but clarity always prevails when our leadership is defined.
In the meantime, as in any storm, all we need do is ride it through.
Nancy Gold is a Master Shirtmaker, owner of The King’s Collar Company, and a professional business writer and entrepreneurial coach.
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