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Lessons from Holiday 2010: There Are Two Economies

Monday, 10 Jan 2011 | 11:41 AM ET

As the latest round of monthly same-stores sales showed, holiday 2010 was the strongest season in four years, but the strength was not shared by all.

Source: nrf.com

Speaking on a panel at the National Retail Federation conference, several retail executives shared reasons to be optimistic about 2011, but still high levels of unemployment and new consumer attitudes are presenting significant challenges.

The US economy has entered a period of stable unemployment but has yet to see any sustainable growth, said Mark Zandi, chief economist at Moody's Economy.com, who sat on the panel with the retailers.

Zandi expects that it possible that we will see sustainable levels of employment growth by the spring or summer.

But looking at sales trends over the holiday season, it appears the economy is growing again despite high unemployment.

But the growth is not even.

Collective Brands CEO Matthew Rubel stressed that the economy has fractured into two.

"There are two economies," he said, explaining that the aggregate numbers will be greater because the upper-end is doing well.

There will be pockets, geographically, demographically, that won't do as well, he said.

In his business, he has seen his upper-end brands such as Sperry Topsiders and Saucony, sell very well during the holidays-often at full price--but sales patterns made it clear that lower-income consumers-where unemployment is closer to 15 percent- are still struggling.

At his value-oriented Payless Shoes stores, consumers waited until late December to buy items such as children's shoes. When they came to shop, they purchased items, but the delay in purchasing was telling.

Rubel as saw pockets of weakness that often reflected the strains of unemployment in those areas.

Still, even with these strains Payless saw higher average sales tickets, which is the amount the average customer spent, he said.

That's because customers were buying lots of boots, which are in fashion this winter, and those come with higher price tags.

Several retail executives on the panel agreed that consumers are more discerning and educated, but are still willing to spend when they find unique products they want.

"When they saw something they liked, price wasn't an issue, but if it was more of a commodity, it was," said Claudio Del Velcchio, CEO of Retail Brand Alliance, which operates Brooks Brothers.

Kingfisher Group Chief Executive Ian Chesire said that is one lesson of the current environment: retailers have to create their own growth by gaining market share rather than being lifted by a "tide" of higher spending.

"In flat markets, you look for opportunities where they are," Chesire said.

He cited his company's decision to offer consumers more defined financing plans so they have some certainty regarding payments that occur over time as one example.

Retailers are looking for ways to grab market share and some of the topics that are being discussed at the conference are how to personalize a customer's experience, and how to more effectively communicate with them via mobile devices and social networks.

Questions? Comments? Email us at consumernation@cnbc.com

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