2004 Forecast on Retail Spending
The Bumpy Ride
WSL Strategic Retail reports, "If ever there was a bumpy ride at retail it was this past holiday season -- from the early high the day after Thanksgiving to the depths of mid-December to the run for the posts the week immediately before and the week immediately after Christmas. Retailers really needed their wits (and their intestinal fortitude) about them.
There was much to learn from this past season... beyond the need for endurance training. The final results said a lot about the nature of the economic recovery in this country. For the most part, luxury retailers did better than discounters, evidence that higher income consumers are feeling more confident about their economic lot. And that's good news.
But even more revealing is the fact that lower income shoppers - the bulk of American households - are still very concerned about what 2004 will bring. Thus, they were much more cautious about when, where and how much to spend over the season. When mighty Wal-Mart ends the season with sales results at the low end of its projections, you know how the average shopper is feeling.
That's been clear to us for some time, as we talk to shoppers monthly in How America Shops¨ ...Everyday, and in our soon-to-be published bi-annual How America Shops¨ Macro Trends 2004. While women and men shoppers are feeling somewhat better about the state of the economy, they are very circumspect, very vigilant about what lies ahead. Their spending is discriminating - they will spend only in certain retail channels, at certain retailers and for select categories.
That was evident over the holidays where luxury department stores did well (Nordstrom, Neiman Marcus, Saks Fifth Avenue), mid-level did not (May Co., Kohl's, Sears). Some specialty stores did well (PacSun, Best Buy, Bath & Body Works), others did not (GAP, Abercrombie & Fitch).
The difference between those that did well and those that did not? Innovation, quality, value and credibility defined the winners.
A word of warning: While higher income shoppers are feeling more confident and willing to spend, they, like their lower income counterparts, are still showing signs of caution in their day-to-day spending as indicated in How America Shops¨ ...Everyday. When asked if they were being more careful about spending, two-thirds of shoppers with income $100K+ said, "yes." This compared to 72% of those under $50K. So the bumpy ride is not over by any means.
WSL from the Edge. "The Bumpy Ride." Retail. 01. 2004. WSL Strategic Retail. 23 03. 2004
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