Retailers Think the Recession Is Still a Serious Reality

However, according to the American Express OPEN® Small Business Monitor, a semi-annual survey now in its tenth year, economic sluggishness is only slightly impacting the psyche of entrepreneurs and business owners, as a small 27 percent say they do not plan to grow in the next six months (up from 21 percent in the spring). The other 77 percent describe themselves as glass half-full optimists (down from 85 percent a year ago). Below are some signs that have reassured these glass half-full optimists that a state of recovery in the retail sector is on its way:

Cash flow is more under control: 55 percent have concerns, down from 66 percent in the spring

There are plans for capital investments: 48 percent plan investments, up from 44 percent in the spring

Hiring is still in the cards: 31 percent say they will hire over the next six months, down slightly from the spring (35 percent). According to the latest Intuit Small Business Employment Index, retailers and small businesses in general are starting to interview and hire an influx of interested candidates. July alone marked an addition of 50,000 employees to the payroll of small businesses nationwide. Theupward trend in job openings and affiliated hires began in October 2009, and as the economy continues to recover, retailers and other small business operations are responsible for the addition of 715,000 jobs.

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To read more of the American Express OPEN® Small Business Monitor results, click HERE.

Strategic Thinking and Innovative Investments to be Awarded

Once a growing supermarket chain with its roots in Scarborough, the Proudfoot Group has been reduced to four stores, making it an independent retail grocer facing the same challenges as other independents on High Street. Owners, Ian and Mark Proudfoot, however, are happy to accept the honor of the Grocer Gold Awards 2011 for Independent Retail Chain of the Year, as they know despite economic hardships their investments have paid off. The awards ceremony took place on June 15 at London’s Guildhall. The event recognizes the best of the best in grocery retail for service, initiative and commitment. Among some of the winners of this year’s awards were Morrisons, Tesco, and Coca-Cola Enterprises.

What landed Proudfoot Group the winning spot in the category of Independent Retail Chain of the Year? Simply stated, judges applauded the grocer for its investment in the future. The Grocer reports, “Proudfoot never lost site of its sustainability commitments and continued to make strong progress in reducing its carbon emissions. Its flagship Seamer store was described as ‘world-class’ by the judges, with Proudfoot managing to reduce emissions by 33 percent last year.”

While some may view a history of 17 stores reduced to four as a loss, the Proudfoot Group has strategically sold its branches such as Withernsea and Barton, and by doing so, has gained a stable platform for the future. Four stores still produce profits, and currently the company is trading very well, distributing 28,000 color leaflets every three weeks, promoting in-store offers. Also, according to the Proudfoot Group’s company website, careful management and communication are also important when it comes to economic hardship, noting, “the company has developed its own software, which controls the company from its head office, to the store’s back office, to the laser scanning software the customer sees when purchasing goods.” It’s every store for itself on Main Street USA and the U.K.’s High Street, and sustainability is something earned through strategic thinking and innovative investments.

U.S. consumers emerged from the recession practiced at stretching their dollars, and now faced with rising food costs they’re turning to the cost savings tactics they’ve mastered over the past few years. That’s the word market research company The NPD Group, which notes that shopping at discount stores is one tactic that shoppers have embraced.

“During the recession consumers adopted thriftier spending behaviors, and as time went on they became comfortable with making concessions and getting by with less,” says Dori Hickey, director of product development at NPD and author of the special report, “What’s Next on the Road to Recovery.” “At the height of the recession consumers said they used coupons more, were stocking up on sale items, buying more private labels, and shopping at discount stores more, among other money-saving strategies. With food prices rising and consumers experienced at getting the most from their food dollars, consumers are going to be increasing these types of behaviors once again,” Hickey adds.

According to NPD’s The Economy Tracker, which monitors consumer sentiment about the economy and spending, a greater percentage of consumers, 21.9%, plan to increase their spending on groceries over the upcoming months, which is up from 16.6% in February. In March, 40.1 percent of consumers voiced plans to spend more on gasoline over the upcoming months, up from 27.6% in February.

The full story from NPD can be accessed HERE.

Dollar General Corp.’s profit more than doubled in the fourth quarter, same-store sales rose 3.8 percent, net sales climbed more than 9 percent and same-store customer traffic and average transaction amounts increased in both the 2010 and 2009 periods, the company has reported.

Since the recession started, dollar stores have been stealing sales away from traditional discounters, The Wall Street Journal’s MarketWatch reports. During the grimmest days of the downturn, even low prices at bargain stalwarts like Walmart Stores Inc. weren’t low enough for the hardest-hit consumers who lived from paycheck to paycheck and flocked to dollar stores. This dovetailed with dollar stores sprucing up their merchandise, building inventory, and expanding locations, generally increasing popularity.

The news comes as retailers are performing a delicate balancing act. They are trying to keep inventories tight and encourage shoppers to pay full price even as profit-eroding promotions tend to be a major driver of sales. Janney Capital Markets analyst Adrienne Tennant said warmer spring weather had been bringing shoppers into stores, but “demand continues to rely on promotions and retailers across the mall continue to offer discounts on clearance merchandise.”

For more on this story, click HERE.

Going into the New Year, retailers still have to navigate a tricky economy and cautious consumers, Forbes reports. On the other hand, they also shouldn’t forget one key lesson learned this holiday season – most didn’t offer deep discounts as they did in previous years, and consumers bought and bought and bought anyway. Profits are expected to be stronger as a result. Some thoughts, or keeping in the spirit of the time of year — New Year’s resolutions — to keep in mind as they perfect this balancing act.

The full story can be accessed HERE.

“There is tremendous pent-up demand as consumers are tired of being afraid. So they’re seeing a little sunlight and a few more bucks in their pockets,” Robin Lewis, an independent retail consultant based in New York, told the Monitor. “They’re willing to go out there and find a little treat for themselves.”

SpendingPulse tracked retail sales beginning Oct. 31 and continuing though Dec. 11. Online sales showed the greatest increase, 13 percent, from the same period last year. Another sign of success of online shopping: Compared with the previous year, online sales increased 18.3 percent on Cyber Monday, the first business day following Thanksgiving, and 17.2 percent that entire week.

The full story from the Monitor, including a breakdown of more sales numbers, starts HERE.

The Commerce Department cited strong sales at both gas stations and clothing stores, the second straight month of gains. Sales were up 0.4%, following July’s revised 0.3% jump, Reuters reports.

“[The numbers suggest] American consumers remain resilient despite the backdrop of high unemployment and declining home values. On the margin, this data reduces some concerns about a double-dip recession,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

For a complete look at all the numbers, and what they might mean for the November elections, click HERE.

IR.com: What would you say was the effect of the recession on independent retailing in general? On the garage storage category?
The recession forced consumers to spend less and only spend on essentials. Garage storage was growing at a 20%+ rate from 2002 through 2007 because the need and demand was there. All of that spending stopped in 2008 with the recession and de-valuation of the housing market. When homeowners are upside down on their home mortgage the last thing they’ll do is invest money into their home.

What do retailers need to do to lure consumers back in an era of reduced spending?
The need for more affordable storage options are still there, and as home values start to increase, consumers will begin to spend money on their homes again. And as buyers pick up the foreclosure homes they need to spend money making them livable again. Retailers need to focus on the features and benefits of garage ceiling storage.

Many went out of business as a result of the past couple of years. To what do you attribute the fact that your company has survived?
We have an owner who is financially strong and believes in the HyLoft product and the potential growth of the category.

How would you describe your business’ experience in the past few years? Has it been a struggle?
It has been a difficult couple of years as business slowed.  It has been necessary to cut overhead (people & programs) and that’s always difficult. We had to get back to the bare essentials and start treating nickels like manhole covers.

What leads you to believe that we now may be headed for brighter times?
Some of our major retailers that share POS info with us are saying that we’re beginning to see sales improvements. Consumers are starting to spend money again — certainly not at the same reckless pace like before but an improvement. If we can just get the financial markets to settle down and as home prices continue to increase we’ll see better days ahead.

What are some of your competitive advantages, and how can other companies take steps to gain the same advantages?
The uniqueness of our product line is a major advantage. Having those products in a major growth category is a real plus.

What are some of main industry trends you’ve been observing, as well as the opportunities for growth?
Housing values, home foreclosures, retail sales, University of Michigan consumer confidence index. We are also exploring new product opportunities in the home storage/organization and garage categories. We are rebuilding our network of small independent contractors who can sell and install garage storage products for consumers.
Example: During the housing boom, garage door installers didn’t have time for anything else. Now with new construction in the toilet these same garage door installers are looking for opportunities and new products that they can install that will produce new revenue for them. Ceiling storage in the garage is that new product and revenue producer for them!

What does the future hold in terms of brick-and-mortar vs. dot-com?
The biggest players in both sectors will continue to grow and the smaller players will continue to struggle and lose market share.

And while the jobless rate has held steady at just under ten percent, more companies are seeking to make hires. The number of job postings in the country rose 19 percent in March, according to Indeed.com, in a survey of websites and classified ads. Retail sales for March were also up, according to the Census Department. The agency reported a 1.6 percent rise over February, and a 7.6 percent rise over the same month in 2009. And in other encouraging news, the Conference Board reports that consumer confidence is up to levels not seen since September 2008. So while this “jobless recovery” may not be over yet, a number of trends are giving retailers reason to hope.

During the holiday shipping season, global volume for UPS exceeded 22 million packages in eight days, including two days on which it exceeded 24 million packages. UPS experienced more delivery volume than in 2008 on each of the seven days before Christmas. A well executed peak season operating plan, and significant growth in online retail sales, contributed to the stronger than expected results for the quarter. For the full year, the company delivered 3.8 billion packages, an average of 15.1 million per day, down from 15.5 million in 2008. Revenue decreased 12 percent to $45.3 billion.