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Gloomy Outlook, But Not For All

Tuesday, October 28

Most retail analysts have already written the eulogy for this years Holiday Shopping Season, and they may be correct. However, not all retailers find themselves facing the same obstacles in their path to a successful, 4th Quarter.

There are, in fact, several retailers that should perform strongly in the face of what many are calling the "toughest Holiday outlook in recent memory." Stores that should vastly outperform their counterparts include: Costco, GameStop and Wal-Mart.

Costco is a membership warehouse retailer that carries a wide range of name-brand products, from Snickers and fresh seafood, to Travel and Home Improvement Services, even funeral caskets at select locations.

This holiday should prove to be a boon for Costco above and beyond everyone else because of financial pressure being put on the top end of the consumer segment. The global financial crisis has had an impact on more than just Wall Street. So as more people start to tighten belts across the country, the question will not become "what can I live without", but rather "how can I live the same for less?". 

Costco, with its spotless stores, wide-aisles, hefty and brand-relevant assortment, coupled with a welcoming, friendly, well-informed staff is poised to become the favorite destination of many a budget-cruncher between now and January.

Sales are poised to surge in their electronics category, where the popular Vizio line of plasma TV's deliver a lot of television (up to 60"), for not much hurt on the pocketbook (under $3000). Add to that a full  line of IPod products, as well as several GPS options, all at a discount, and you start to see why this is an opportunity shoppers will not pass on.

The category that will really drive Costco to the top of the "holiday winners" chart this year will be it's unending supply of name-brand household essentials, all at incomparable prices. Whether it's Tide detergent, Starbucks coffee, Heinz catsup, Special K cereal, Crest toothpaste, Shiseido facial cream, Huggies diapers or Advil and Aleve pain tablets, this store has all the bases covered. 

So as more and more Americans make saving a priority, while trying to maintain the lifestyles to which they have become accustomed, stores like Sam's Club will get a bump. The clear winner though will be the retailers that carries the familiar products, at fantastic prices. That store is Costco.

The only category that seems to be bucking every negative trend in the recent retail market is, consumer electronics. Think about it, over the last eighteen months we have seen the wildly successful rollouts of: Nintendo's Wii, Sony's BlueRay DVD and PS3, Apples' IPhone, IPod touch and MacBook Air, Google's G1, BlackBerry's everything, afordable HD camcorders, Microsoft's Zune, as well as others I am sure I am forgetting at the moment. Wow!

Thus far, in 2008, recording artists have produced 15 Platinum albums, with Lil' Wayne's "Tha Carter III" leading the way with sales in excess of 2 million copies. That pales in comparison to the unprecedented 26 video game titles that have sold over 1 million units in the U.S. alone since January 1 of this year. When you consider the top selling video game title of 2008, Wii Sports, sold 6.4 million copies in the United States alone, you start to grasp the gravity of the situation.

GameStop, with 4000+ stores in the U.S., is the retailer best positioned to reap the benefits of the video game phenomenon during holiday 2008. The store is, quite literally, everywhere. And we need them to be. 

They also have something every retailer in America only dreams of replicating, a staff of "users", or people that use and know the ins and outs of everything sold in the store. Non-gaming adults can walk through the doors of a GameStop, ask for a gift suggestion and, depending on how many associates are on staff, get a lively debate on the merits of many options, generally ending in your walking away with a sound choice, sure to satisfy the most ardent gamer.

Beyond being helpful and knowledgeable, the return policy is beyond fair (I would say the best in the retail industry). Just bring the receipt, along with your opened or unopened product, and you can exchange the item, as long as it is within 30 days. This is most fair because the average gamer is more than happy to visit their GameStop more than once a month, if not once a week. 

The Video Game Industry, more than any other, has emulated and capitalized on the model of the Motion Picture Industry's model of making events out of big releases. With the hyper-successful releases of GTA-IV and Halo-3, as well as last nights Fall Out 3, they seems to be going about utilizing this strategy to it's full potential. They also have the benefit of rolling out a few MAJOR titles this year. For unlike movie titles, video game sequels are sure things! 

This holiday season will see the release of Resistance 2 (11/4), Gears of War 2 (11/7), Call of Duty 5 (11/11), Tomb Raider: Underworld (11/18) and Prince of Persia (12/2), which gets a "Batman Begins" style franchise reboot that looks impressive so far.

So, barring running out of merchandise (don't laugh, it happened a lot during holiday 2007), Gamestop seems a sure bet to have a break-out 4th  Quarter.

The last "winner" of Holiday 2008 will be Walmart

If for no other reason than they have the smartest (no one claims most beloved) team in the business. They are just spot on in their forecasting, with most other retailers sitting around waiting for Walmart to break the good/bad news and react accordingly. The problem this year is, there will be NO TIME to react to market conditions. Retailers will sink or swim based on the decisions their merchandising teams made, some as early as February 2008. Do you shudder at the thought? I certainly do. 

I can tell you I would not be comfortable with a retail decision made in mid-September,before the market meltdown, let alone 3-9 months ago. The Walmart team are always, always, always analyzing every aspect of their business, so they have razor-thin margins, and the best inventory management systems in the business, hands down. This will allow them to make the moves necessary to ensure they are taking advantage of every opportunity that presents itself within their stores. The combination of speed and information will allow them to emerge better off than almost everyone else. Don't look for a massive increase, but expect them to come away with a win, if only marginal.

There are certainly storm clouds on the horizon this holiday season, however, I am comfortable in saying these three retailers brought their collective umbrellas.



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