It’s no secret that the retail industry has suffered greatly during the economic downturn. In our 2009 forecast, we were just beginning to sense the consumer’s new spending habits with falling retail sales.
The past 18 months have brought a new reality for shoppers and retailers alike, and having 2009 behind us gives everyone a cause for optimism.
Total retail trade (store-only sales) in Clark County reached $1.956 billion in 2008, 7.8 percent and $165.5 million less than in 2007. This drop-off took us back to near 2005 levels.
o Clark County retail sales will show improvement throughout the year, with the greatest improvement coming in the second half.
o Clark County retail sales will show improvement throughout the year, with the greatest improvement coming in the second half.
o Overall retail sales in Clark county will show a moderate 2 percent increase from 2009.
o Discounters in grocery, general merchandise and clothing will continue to attract shoppers who have developed more frugal spending habits.
o Fine-dining restaurants will continue to struggle, while value-oriented family dining captures stronger market share.
o Overall retail sales in Clark county will show a moderate 2 percent increase from 2009.
o Discounters in grocery, general merchandise and clothing will continue to attract shoppers who have developed more frugal spending habits.
o Fine-dining restaurants will continue to struggle, while value-oriented family dining captures stronger market share.
The first two quarters of 2009 saw store sales fall 11.97 percent and 8.9 percent, respectively, from the same periods in 2008, according to the most recent figures from the Washington Department of Revenue.
By September and October, retail sales, nationally, actually showed some increases, falling slightly again in November. Based on national and local trends, it is projected that total store-only taxable retail sales for 2009 will be 8 percent lower than the previous year, a loss of nearly $157 million in sales in Clark County.
During the past year, while shoppers pulled back their spending, we watched in dismay as Circuit City liquidated, and Portland-based Joe’s closed its stores. Businesses struggled to control costs and make adjustments in any and all ways necessary to hold on through the downturn. While we saw some stores close and very few new stores open, the losses could have been much worse.
Retailers have realized they need to adapt to the new consumer, if they could just figure out who and what the new consumer is. Rather than spending freely as they have for several years now, consumers are reported to be paying down debt, delaying purchases and increasing savings.
Today, it is out of vogue to shop unless need and value are driving the purchases. Even those individuals and families who have not directly lost income or resources have found property values and portfolios have declined, leaving them less willing to be extravagant.
A retail recovery will limp along or be delayed until confidence in the growth of the economy and employment once again provides the stimulus to spend. And it will take consumer spending to stimulate the retail recovery.
Retailing good news
If there was any good news in 2009 retail, it was that the mass of projected store closings didn’t happen. According to Retail Traffic Magazine, closings through mid-October totaled 3,840, on a pace equal to 2006 store closings, rather than the 10,000 to 12,000 anticipated at the start of the year. Retailers have better positioned themselves with lower inventory levels, avoiding the price reductions we saw in 2008.
This, along with negotiated rental rate reductions with landlords, has given retailers an opportunity to be profitable or better sustain themselves even with lower sales. National retailers that ended up closing last year — such as Linens & Things and Circuit City — did so because they were unable to get credit to continue operations. However, analysts caution that if January doesn’t continue the positive spending trend, 6,000 to 8,000 underperforming stores could close, giving us more retail vacancy in 2010.
Discounters perform
Based on November retail sales reported by the International Council of Shopping Centers, we get a look at who’s doing well and who’s struggling. Not surprisingly, discount stores have performed well with shoppers “trading down” to less expensive options. Walgreens is showing increasing sales. Kohl’s has shown steady increases since July; TJ Maxx and Ross have had positive results since February.
Costco showed a 4.5 percent average monthly increase during 2008, but a 2.6 percent average monthly decrease in 2009, due to losses through July. Target did not show positive year-over-year sales from February through November.
The luxury segment was reported down 12.8 percent through November compared to 2008. And home décor and furnishings stores, appliance manufacturers and mattress stores saw an uptick in sales in November after several years of losses.
Less certain of future
Today retailers are less certain than ever that their formulas for success and growth are on the right track. The consumer is evolving, and only retailers that understand their customers’ motivation and habits will be able to survive. For a chain store, that means that merchandising may vary from location to location to match customer demographics. Local stores will need the same response to the customer. Stocking a wider array of store-brand items has been the answer for some grocery chains.
Retailers are concerned that consumers’ shopping habits will be permanently changed, or that at least for the foreseeable future the customer will continue to hold back. A look back to how the Depression changed consumerism give us an idea that new habits — away from indulgence and luxury items and toward value, discreet spending and personal savings — may be with us for many years to come.
A sense of recovery
Looking ahead, there is a sense that the recovery will continue very slowly. Shoppers seem to be tiring of holding back and are ready to get back into the shopping game. Restaurant franchisees are projecting stronger sales and store growth in 2010. Clark County has a couple of new store sites ready to be developed. For now, stores expected to open are the WinCo in Brush Prairie and Buffalo Wild Wings in Hazel Dell. Fewer independent stores will be opened until credit loosens up.
Longer term, many unanswered questions remain:
o What would be the impact of state sales tax increases, if they occur?
o What impact would bridge tolls or light rail, or both, have on shopping habits?
o What other uses might empty retail space be considered for?
