The 2010 Christmas Conflict And Its Negative Impact On Small Business
Two conflicting studies creates math that doesn't add up for small business heading into this Christmas selling season, according to Peter D. Morris, CEO of the shopping center and real estate firm Greenstead Group, LLC.
October 18, 2010 (Newswire.com) - Two conflicting studies creates math that doesn't add up for small business heading into this Christmas selling season, according to Peter D. Morris, CEO of the shopping center and real estate firm Greenstead Group, LLC. He points to a forecast from the National Retail Federation and a study by Gallop that paint an incongruent picture.
Holiday retail sales are expected to increase 2.3% this year to $447.1 billion, according to a forecast released by the National Retail Federation. This would mark an improvement from last year's 0.4% minor increase, but is still below the ten-year average holiday sales increase of 2.5%. Morris notes however that overall sales have been irregular so far this year as concerns about the economic recovery linger, a sentiment shared by Jack Kleinhenz, the federation's chief economist.
"While consumers have shown they are once again willing to spend on what's important to them, they will still be very conscientious about price," Kleinhenz said in a statement. "Retailers are expected to compensate for this fundamental shift in shopper mentality by offering significant promotions throughout the holiday season and emphasizing value throughout their marketing efforts."
Conversely, Morris notes studies by the International Council of Shopping Centers and the government concerning consumer spending that all point to a reduction compared to previous levels.
To add to concerns about consumer activity, the government recently put out its report on consumer's falling credit balances. They are falling consistently and rapidly. New information from the retail sector indicates that most companies have no plans to add employees for the holiday season, a sign that they fear the foot traffic and e-commerce activity will be no better than they were last year.
Gallup also recently completed a poll that shows average consumer spending per month dropped from July to August this year and has now reached a plateau which is consistent, and not likely to rise. Gallop's studies of self reported spending showed consumers have decreased their average daily spending by 38% from January 2010 to August 2010 as compared to the same period in 2008. Morris also notes that the 2009 daily average was slightly higher than in 2010 indicating a slight continued drop.
"This begs the obvious question," asks Morris, "How can retailers expect a sales increase this holiday season when other data indicates that consumer spending has fallen down and can't get back up?" It is a rhetorical question, as Morris believes he knows the answer based on his 30 years in the retail industry.
Morris sides with the data that indicates the total market is flat. "That means sales increases for some businesses will come at the expense of other businesses," Morris states noting that market share remains the key for every business. "For the two years I have been telling small business that this is 'Darwin Economics' when stronger business will eat smaller, weaker business", he said. Morris also points out that the National Retail Federation also expects significant promotions to happen between retailers to lure customers.
The consumer will be the winner in these promotional fights, but Morris predicts that small businesses that do not plan an effective strategy now - heading into the season, will see the repercussions by the end of the first quarter of 2011. Traditionally, many retailers, restaurants and service providers, such as hair salons, count on the cash flow from the last 6 to 8 weeks of the year to tide them over during the negative cash flow months at the beginning of the next.
Morris also worries that small business will not be heard through the din of the national retailer advertising in traditional and new media. "Small business needs to develop another avenue to attract customers, keep existing customers and increase sales. Word of mouth doesn't cut it, and new age and social media takes more time than most business has available during Christmas." he said.
While his company provides an Instant Rewards program called the NOWcard Morris thinks that is just one possible solution in a larger package of marketing tools small business will need to use. Other tools must include a focus on service, up and cross selling, a generous return policy and other practices that don't focus only on price discounts.
"The consumer wants value when they buy", he said "define what value means to your current and potential customers. Focus on that as your market differentiator. Then create the processes, systems and training to deliver that over the next few weeks".