The December 2012 sales results have just been announced, and there
was a substantial increase over the past year for some retailers.
Nordstrom was impressive reporting an 8.6% increase in comparable store
sales. Contributing to the increase was Internet sales (which I estimate
to be more than 35% over the previous year). Macy’s 4.1% increase in
comparable store sales was lifted by a 52% increase in Internet sales
underscoring the strength of its omni-channel strategies as I have
written about previously. Kohl’s reported a 3.4% increase in comparable
store sales helped by 46% increase in Internet sales. Costco was a star
performer with a 9% increase in comparable store sales. Target reported
flat sales for the December period. The Gap reported a 5% increase
boosted by 13% for Old Navy. These are pretty good results for these
large retailers, and there is no doubt the Internet was a net plus to
business. It is also a highly promotional retail channel just like the
brick and mortar variety.
Long before Christmas the Internet sites of many stores had very
persuasive offers – Macy’s advertised their Last Minute shopping event,
Toys “R” US had lowest prices of the season and Kohl’s and JCPenney also
continually advertised 40 to 60 percent off events. Lands’ End and
L.L.Bean, both former catalog retailers, had almost daily offerings and
events. The post Christmas advertisements targeting Internet shoppers
are even more aggressive – now I see clearances of the whole store at
30to 60% off – some even at 70%.
All types of retailers have to rid themselves, now,
of winter merchandise.
The Holiday season was lackluster until the
final week before Christmas, and, while the last days were frantic –
there is still lots of unsold merchandise. Under these conditions it is
no longer a question of whether a profit can be made; but rather, how
quickly can goods be sold so that retailers are ready to receive and
display fresh Spring goods. Despite below-freezing temperatures in much
of the US, the stores soon want to look fresh, exciting and ready for
the new season. That means heavy promotions and big discounts to entice
consumers to buy, now, the things they did not buy for the Holiday.
Retail nirvana would be not having to liquidate seasonal goods at
virtually no profit; and there was once a retailer that made that very
idea a cornerstone of its strategy. In the 1970’s and 1980’s Petrie
Stores was a big popular priced fashion chain run by Milton Petrie,
Chairman, and Hilda Kirschbaum Gerstein, President. The group’s 1700
stores operated under several banners including: Petrie’s, Marianne,
Jean Nicole, Winkelman’s, Stuarts, M.J.Carroll, Rave and G&G. Milton
Petrie’s philosophy was to convert his stores to a Spring look by the
middle of December.
This transition into the next season resonated with
his customers who bought Spring fashions well before the temperatures
outside began rising. Petrie’s customers enjoyed giving Christmas
presents that heralded the new season. This merchandise strategy was
very profitable for Petrie stores because it reduced the need for
post-Christmas markdowns. However, it was a different time; a less
competitive time. There was no Internet; consumers did more mall
shopping than they do now. In the end, despite a differentiated
approach to seasonal merchandising, Petrie Stores did not make it. The
company declared bankruptcy at the end of 1994 due to lack of effective
management succession.
Today’s retail environment is very different than when Petrie Stores
hailed supreme. The Internet has added significantly to the competitive
fray. The Internet allows consumers to quickly, and easily, comparison
shop whether for the biggest bargain in electronics or the right
fashion at the lowest prices. Sites like HauteLook, MYHABIT, Rue La La,
yoox, Gilt, Ideeli, and Bluefly, just to name a few, offer special deals
on fashion goods that shoppers have a hard time ignoring.
What does it all mean? Retailing is more promotional than ever and
the customer responds to value offerings. Maybe she is worried about her
budget and wants to stretch her discretionary dollars as far as
possible. Maybe she is worried about her job. Maybe she has more people
to care for and less time to shop. Big promotions and deep discounts
give her more comfort she is getting a good value and making a good
decision when she spends. These consumer pressures are not going to
change. I think 2013 will be continue to be very promotional with the
Internet leading the way as it continues to gain market share from other
types of retailing.
www.forbes.com
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