Consumers Win Game of Chicken; 40-60% Off "Entire Store" at Some Retailers; Low Prices are Good; US Senate Economic Illiteracy
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I have questioned all these glowing retail sales estimates in light of Buyer's Remorse; Record Volume of Returns Before Christmas; $217 Billion Returns Expected, Up 14%.
Retail Sales Not In Alignment With Shipping
Moreover, stores were supposed to be run low on merchandise so they could charge full prices. Yet reported retail sales are not in alignment with truck fuel usage as noted in Ceridian Fuel Index Shows Christmas Doesn't Come Early to the Trucking Industry
However, the Ceridian index is in essential alignment with with energy usage as noted on December 9 in US Petroleum and Gasoline Usage Plunges Last 5 Weeks Compared to Prior Years
Consumers Win Game of Chicken
Today we get a third piece of evidence that all is not well in retail-land. In spite of a glowing "Black Friday" reports, consumers held back and won a victory over retailers.
This was not supposed to happen, but Retailers Are Slashing Prices Ahead of Holiday, not just select items but rather entire stores.
Half off at the entire store at Ann Taylor. Sixty percent at Gap. Forty percent off almost everything at Abercrombie & Fitch.Low Prices are Good
“It’s really a game of chicken,” said David Bassuk, managing director and head of the retail practice at the consultant firm AlixPartners.
Many retailers entered the season “with pretty optimistic plans” that shoppers would rush into stores and pay full price, Mr. Bassuk said. But that did not pan out, and the final days before Christmas have retailers being “much more aggressive in terms of promotions being offered,” he said.
Toys “R” Us announced on Thursday new deals on dozens of items for Friday and Saturday, including ‘buy one, get one half off” on popular toys like Legos. A sampling of other promotions: Up to 70 percent off toys at Amazon; up to 50 percent off gifts at Restoration Hardware; 40 percent off almost everything at American Eagle Outfitters, Talbots, Limited and Wet Seal; and 30 percent off everything at J. Crew.
“There’s been kind of a waiting game with retailers,” Gerald L. Storch, the chief executive of Toys “R” Us, told CNBC last week. “And it looks like the consumer wins.”
Paul Lejuez, an analyst at Nomura Equity Research, surveyed mall deals over the weekend and said he was concerned. “It looks like 40 percent is the new level you have to be at, 40 percent off, to drive traffic. Those that weren’t at that level weren’t getting their fair share,” he said.
Going into the holiday season, inventories had grown more than three times as fast as sales at several retailers, including American Eagle Outfitters, Aéropostale, Gap Inc., Urban Outfitters, Chico’s and Talbots.
“The inventory is worth so much less in two weeks,” said the chief executive of a retailer, who asked not to be named because he did not want to reveal his store’s strategy. “With that kind of inventory, you’ve got to get rid of it. Whatever the margin is today, it’s that much lower next week and the week after when traffic stops.”
Low prices are good. The more the competition the better. Yet economic fools including US senators think otherwise.
Senator Snowe Calls on Amazon to Cancel Attack on Small Businesses
In an extremely misguided news conference Republican Senator Olympia Snowe Calls on Amazon to Cancel Attack on Small Businesses
U.S. Senate Committee on Small Business and Entrepreneurship Ranking Member Olympia J. Snowe (R-Maine) issued the following comment regarding Amazon.com's upcoming promotion targeting small business pricing:Economic Idiocy at Its Finest
Senator Snowe, said:
"Amazon's promotion - paying consumers to visit small businesses and leave empty-handed - is an attack on Main Street businesses that employ workers in our communities. Small businesses are fighting everyday to compete with giant retailers, such as Amazon, and incentivizing consumers to spy on local shops is a bridge too far. I often tour Main Streets in cities and towns across Maine to speak directly with local business owners, and they have told me repeatedly that they rely on increased sales during the holidays to grow their businesses and create new jobs. Indeed, according to the latest NFIB Economic Trends Survey, small business owners listed "poor sales" as the top problem they face. As such, during the busiest shopping season of the year, we should remember that our local restaurants, bookshops, and hardware stores are the economic engines in our communities. I urge Amazon to cancel its planned promotion, and look for ways to partner with Main Street, not promote anti-competitive behavior that could shutter the doors of America's small businesses."
Senator Snowe's message is economic idiocy at its finest. She wants everyone to pay more for merchandise to protect small businesses. For starters, people have enough problems with high gas prices, high food prices, high debt, and shrinking real wages. Consumers need to save every cent they can. Competition from Amazon is a godsend.
Effectively Senator Snowe is asking everyone suck up to protect mom-and-pop businesses. Her message is misguided in more ways than one.
As noted, Snowe's position is a bad bargain for consumers, regardless of whether Amazon would comply. Ironically, even if Amazon complied (Amazon won't and they shouldn't), business would not go to mom-and-pop stores but to Walmart or Target or some other firm slashing prices 40-60%.
Need for More Amazons!
We need more Amazons not less. Every dollar consumers save on clothing, electronics, books, etc is another dollar that can go to food, shelter, and gasoline.
Speaking of which, more online shopping would help cut down on gasoline usage, and in case no one has noticed the world is running out of cheap energy sources.
It is disappointing but not surprising to see such economic incompetence in the US Senate, and that is one of the reasons the US is in such a fiscal mess in the first place.
Mike "Mish" Shedlock
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