Improving Growth

Now that economic conditions appear to have stabilized, more retailers are planning store expansions and increased initiatives to monitor and serve their customers, as they focus on improving growth in 2011. Two recent reports show that in addition to keeping costs low, the new top priorities for retailers in the months ahead are increasing their use of online technology and social media. In its recent report on the retail sector, Standard & Poor’s Equity Research forecasts a positive year for the retail industry, fueled by a three percent rise in consumer spending. “Perhaps the biggest catalyst for improving retail sales in 2011 will be the extension of the Bush era tax cuts, and the two percent payroll tax cut for all workers for one year,” Marie Driscoll, group head of Consumer Discretionary Retail analysts at S&P Equity Research, told “We think this tax holiday will have a significant impact on spending, as the median income family earning about $50,000 per year will receive an additional $1,000 in its paychecks and those earning $106,800 (the current limit of FICA taxes) and above will take home about $2,100 more this year.”

The S&P report projects a 10 percent increase in online retail sales growth in 2011, as consumers continue to seek convenience and value. The report also suggests retailers will look to meet individual consumer demands through increased customer service and marketing, much of which will be accomplished through the use of computer algorithms that analyze shopping activity. Another recent report by the National Retail Federation’s NRF Foundation and advisory firm, KPMG, suggests that retailers are so optimistic about 2011 that 41 percent said their companies intend to increase domestic store expansions this year, up 25 percent from 2010. Additionally, 25 percent are preparing to expand overseas, up from 21 percent a year ago.