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Rising to the Occasion

Monday, November 17

November has, so far, been a better month for Retailers than some (self included) had forecast. There are several ancillary factors that worked in merchant's favor this year. 

For instance: 
  • A very late Thanksgiving (27th) which enabled tamped down expectations for the first half of the month.
  • The market starting it's meltdown in September allowed ample time for stores to cut non-advertised holiday orders and slash prices in time to counter-balance consumer fears about spending.

These things, and others, have led to a better than expected, though still tough, start to the month and has many retailers feeling they may emerge from this holiday season with a "win."

Such thinking is nonsense. As stated in previous posts, this is the toughest environment facing the Retail Industry in over 30 years. Those that are banking on things remaining on the same tracking lines of what has happened in their stores so far in November are in for a rude surprise. They are much akin to those few, grainy people you could barely make out in the videos before the tsunami hit Thailand, walking out on the exposed surf to see where all the water went.

While many can take pride in what has happened thus far, here are a few realities to consider:

  1. There were 240,000 jobs lost in the United States LAST MONTH! This does not include part-time workers, those that saw drastically reduced hours, or those that are considered "contract workers."
  2. Citi-Group has announced plans to cut 52,000 people from their workforce, in addition to the 22,000 already in the works. That is from ONE company. Now they are the first to "jump" in the troubled financial sector, surely others will follow suit rather soon.
  3. The Technology Sector announced 70,000 lay-offs in the 3rd Quarter alone, and expect another 40-50,000 before years end.
  4. Circuit City  is closing 150 stores and has filed for bankruptcy, and Best Buy has issued warnings about holiday expectations. However lost in the chatter is the story of Tweeter. This company with well over 100 stores has gone belly up without any fanfare. All this happening in what many consider to be the strongest segment of the Retail Sector, consumer electronics.
  5. The onslaught of bad press regarding gift-cards this year. Every newspaper and broadcast news program has done a segment warning people of the "dangers" of buying gift cards. This will kill off a significant portion of the late-December to January traffic, of people looking for bargains, we have come to expect in years past.
  6. The tightening credit markets, which have not yet fully expressed themselves with regard to the consumer credit-card market yet, but it is coming.
Add to this:
  • Retailers cutting prices fully 2-3 weeks earlier than any time in recent memory. Forcing stores to sell more quantities to meet the same sales figures.
  • Downward pressures of lower gross margins as a result of price cutting.
  • Heightened consumer expectations of further reductions for the post-Thanksgiving holiday weekend, that must be met.
  • Chronically high transportation costs (though they have contracted lately) to move goods around.
  • Slashed advertising budgets.
  • The unfortunate timing of 401k statements arriving at the end of October - beginning of November, bearing ill news regarding retirement portfolios.

The picture of a dour December, with high double-digit losses, becomes a bit more clear. And for those that make it, an unbelievably tough January.

Those companies with Human Resource Department that have been aggressive and forward-looking in their planning, will be ready for this development. Those without will be left with badly bloated employee rolls, confused and emotional managers at a time when all focus should be on driving business, and most unfortunately, a stress-filled environment full of guess-work and uncertainty about how to handle the situation properly.

Take action now, proactively. You owe it as a leader, to your employees, your management staff and your clientele, to be as professional and up-standing, most especially in tough times, as possible.



2009 ·clean needles by TNB