TNS Retail Forward: Retail Malaise ‘Bottoming Out’?
By Tom Ryan
The consumer-spending funk has to end some time and TNS Retail Forward believes it could be now. According to the consulting and research firm, December same-store sales declined 1.5 percent, a marked improvement over November’s 2.5 percent drop.
That’s based on a survey of about 40 major retailers releasing December figures last Thursday.
“It’s encouraging that most retailers saw some improvement in their numbers compared with November,” said Frank Badillo, senior economist at TNS. “In the case of Walmart and others, the new weakness largely reflected the impact of weather, lower gasoline prices and even exchange rate effects. Â These results provide signs that retail weakness may be bottoming out.”
The “signs of bottoming” in the December’s same-store numbers, according to TNS, are also evident in the TNS Retail Forward ShopperScape Survey fielded at the end of December:
- The percentage of shoppers intending to spend less in the coming month held steady at 54 percent at the end of December;
- Those planning to spend about the same amount rose to 41 percent in December from 39 percent in November;
- The one area of slippage was among shoppers planning to spend more in coming months, easing to five percent from seven percent in November.
Many of the other findings from TNS showed how ugly the bottom is:
- The 1.5 percent decline compared with a 0.2 percent composite gain reported in December of 2007. The results were led by discount department stores–largely Walmart, even though its results were lower than expected. Â Apparel and accessory stores and department stores reported the worst composite results, followed by warehouse clubs;
- The average household reported spending nearly $60 less on holiday gifts in December–and about $25 less on gifts purchased online in December;
- The categories where shoppers intended to cut back the most: CDs and DVDs, clothing, toys and books. The two categories seeing growth were video games/gaming systems and personal care/beauty items.
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At which retailer websites did you shop for holiday gifts?
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December 2007Â
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December 2008Â
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|
| Sample Size |
2,150
 |
2,528
|
| Amazon.com |
49%
|
47%
|
| Walmart |
36%
|
29%
|
| Kmart |
31%
|
26%
|
| Target |
11%
|
9%
|
| Best Buy |
25%
|
19%
|
| Circuit City |
17%
|
10%
|
| Sears |
14%
|
12%
|
| JCPenney |
19%
|
17%
|
| Macy’s |
10%
|
9%
|
| Kohl’s |
16%
|
14%
|
| Toys “R” Us |
19%
|
16%
|
| Lowe’s |
7%
|
5%
|
| The Home Depot |
8%
|
7%
|
| Overstock.com |
23%
|
16%
|
| eBay |
n/a
|
24%
|
| Apple |
5%
|
4%
|
| Dell |
7%
|
5%
|
| QVC |
9%
|
9%
|
| Sam’s Club |
7%
|
6%
|
| Costco |
7%
|
6%
|
| None of these |
17%
|
22%
|
| Source: TNS Retail Forward ShopperScape, December 2007-December 2008Â | ||
Discussion Question: Do you think the consumer spending malaise may be hitting rock bottom? What signs would you need to see as evidence that the erosion in consumer spending has stabilized?
I think that one data point, that is still bad news, hardly suggests that we’ve hit bottom and the turn-around is about to begin. We shouldn’t be optimistic just because December didn’t suck as much as November.
Thanks for the data, however, with the current climate, i.e. new stimulus package, the big 3 still on critical life support and the real estate market not near the bottom, I see consumer spending stagnate until 3rd Q 09. I would need to see a stable market correct across the board.
I believe that in the retail sector, we will not see a correction until 1Q 2010. There will be more down sizing, companies going out of business and malls trying to figure out how to keep the current tenants they have left happy and customers in there centers.
If consumer confidence enjoyed an upward blip at all recently, it can be attributed to the brief drop in gasoline prices. That’s over now and gas prices are upwardly mobile once again with dire predictions for the summer. Iran’s income was suffering from the lower oil prices, and amazingly their sponsored violence in Gaza increased. The resulting heightened Middle East unrest did what it always does–tightening sphincters and concerns among speculators about tightened oil supplies. Oil futures go up, throwing cold water on consumer confidence once again.
There might be a slight come back from the shopaholic segment of the population but it will be short-lived. We have yet to see the delivery of much of the pain that is yet to come. As the layoffs continue, they will trigger massive defaults in automobile loans and credit card debt. Our country’s economy is based on credit and recently on credit issued to borrowers not worthy of trust. Until we are forced to revert to a higher standard of commerce, our situation will not improve.
“Those planning to spend about the same amount (in the coming month) rose to 41 percent in December from 39 percent in November”
How can this be? December spending is, almost be definition, higher than other months for obvious reasons–even if your gift buying is the proverbial lumps of coal, it’s an expenditure you won’t be making in other months. Without a clarification of this number–and by extension, the other numbers as well–I’m hesitant to put much stock in the survey.
I would not count on a bottom yet. Many companies pay previous year’s bonuses in the first six to eight weeks of the new year. Without doing any research, be assured that the 2008 bonuses, payable in early 2009, will be drastically lower than last year and lower than any other year in the last decade. This will surely translate to lower first quarter retail sales.
While the bottom may be near, the top will be years away. The consumer spending spree that translated into retail sales was financed by easy credit on home equity and credit cards. While interest rates may be low in the short term, the ability of the borrower to borrow and the lender to lend has been reduced by trillions of dollars. The country will continue to see a positive savings rate (which of course does not reflect increased savings, just decreased debt).
No, we have not hit bottom. Ask the question again after we see the estimated 75,000+ stores close in the first half of the year, or the 120,000+ stores close by the end of the year. Ask after Circuit City shuts its doors after not finding a buyer, or the same with Pier 1 and Borders.
Only then will we know if the retail buying malaise is over.
“MISSION ACCOMPLISHED” seems a bit premature. The holiday shopping season can mask what’s really going on with consumers, given the shopping behaviors in evidence during those 2.5 months are much different compared to how consumers shop during the remainder of the year. The numbers will definitely tell us when the malaise has ended, but I don’t think these numbers do that. And keep in mind that consumers need to feel confident about plenty of things (jobs, nation’s economy, personal debt, housing crisis, etc.) before they feel confident about opening their wallets.
OK, I had to do the math.
There have been 21 comments on this thread as of now.
20 are outright negative and 1 is philosophically noncommittal.
Now, if all those stock market pundits who say that you can “call the bottom” when investor sentiment is uniformly bearish” are right….
People are shopping in their own closets and pantries and are entertaining at home. Money (credit) is tight for millions of folks, and those who still do have money or access to funds are too scared to spend. Prediction: We are nowhere near the retail “bottom.”
It would be extremely hopeful to think that the market malaise has bottomed out, but it may also be bad if it did. Not enough cleaning house has occurred in my estimation. Retailers haven’t come to grips with the way their stores operate, look, or how they cater to customers.
In my opinion, retailers need to take a hard look at the experience the are putting out there and make changes that engage and delight customers. Those who haven’t done anything to there stores other than cut inventory and cut staff, shame on you. Those retailers who are reinventing themselves during this time, might need a few more months to listen to the customer and find the right strategy to lead themselves into a fruitful future.
It is my hope that we don’t loose any more retailers, but change and upgrade them all for success.
First, three of my friends were laid off last week so I’ll likely ignore any “good news” from the media and continue to conserve cash. I would expect that everyone who knows someone who got laid off will do the same. Second, not going out as often combined with winter weather has led me to focus on decluttering my apartment. The exercise has taught me something: less = happier. Other people I’ve spoken with that have done the same have the same reaction: why did I ever accumulate all this stuff in the first place? I don’t think the correct question is, when will the retail malaise bottom out? I think the question should be, are we going to see a permanent shift away from “more” by the average American consumer?
The only factor that may save January is that the last week of December (the week of New Year’s Day) falls into January fiscally for most retailers, and that week, from all reports, was very busy. Of course, there were heavy discounts going on, so sales (not profits) should show more positive than last year.
Other than that little quirk, from all the verbals we’re getting from retailers, January is expected to be worse, February too. And with upcoming weather for the entire Midwest and East Coast projected to be at least a full week of sub zero temps, I’d have to agree with those retailers: we’re not there yet in terms of bottom. Think April–May.
Soon–if not already–it will be fashionable (or newsworthy) to talk about the positives of this downturn, but in reality, the consumer is still very, very leery of spending to any great degree.
I think Obama’s inauguration is a key event. The media hates Bush and loves Obama (as do many Americans). When Obama officially starts, I think we will see more focus on positive news and I believe that some levels of consumer confidence will slowly increase. The war in Iraq is headed towards ending and the Bush era is over. Obama provides hope and with that, hopefully, consumer confidence.
Don’t be misled by December sales that retailers are about to bounce back anytime soon. Keep in mind a couple of technical issues that helped last month’s sales: First, the “late” Thanksgiving hurt November comps and drove some of the post-Thanksgiving volume into fiscal December instead. Second, the leap year put two extra shopping days into the critical final week before Christmas. I’m sure the numbers up to the 22nd of December were very tough.
Most importantly, December is a “need to buy” month in terms of the gift-giving season. January is likely to be soft, not only because of the lack of discretionary spending but also because stores’ inventory levels are relatively lean. So don’t be overly optimistic about “turning the corner” until consumer psychology improves along with the jobs outlook. Right now it’s hard to figure out just where the corner is.
I’m surprised TNS would come out with such a bold prediction right now. We haven’t even seen the credit card meltdown yet and the associative retail credit meltdown. Sentiment is negative and will remain that way until all the meltdowns have happened and we start seeing positive economic news. Retailers will have to work especially hard for sales in the 2 or 3 quarters.
My advice is to not worry about where the bottom is or going to be and focus more on controlling margin at the store level. Sales numbers are all fine and dandy but what is the actual net going into our pocket? Upcoming margin and profitability reports are not going to be pretty. Engage your customer now and build the basket.
The consumer has been pretty badly traumatized over the past six months and they weren’t feeling very good about things before then. It’s going to take a while for the effects of all these shocks to heal, and that assumes things don’t get appreciably worse, which they very well might. At best, we might see a beginning of a bottoming where things aren’t deteriorating as rapidly as they were, perhaps in Q1 and Q2, but I suspect we’re going to need to adjust to a prolonged bottom, a new equilibrium, before things turn up again.
Consumer sentiment is now the main driver of spending. Abject fear of the unknown is being slowly replaced with internalization of the grim realities. Still, in almost all cases where sentiment is concerned, a known is better than an unknown.
Much as I wish that we were hitting rock bottom, I believe that we still have a ways to fall. Unemployment is expected to continue to rise and with it, consumer spending will fall.
The constant bad economic news everywhere one turns is feeding fear in consumers. And fear will compound consumers’ reluctance to spend.
While part of December’s somewhat better results (actual sales) can be attributed to a late Thanksgiving and therefore more sales pushed to December, we have seen some evidence of stabilization. It is very inconsistent (look at what Neiman-Marcus posted for December!) and given the layoffs continuing it is likely–just like the stock market–consumers and therefore retail will take time to recover. One month does not usually a trend make!
The decline in consumer spending has not hit bottom nor is it likely until sometime in 2010. First, job losses and unemployment increases must level out. If all works as the Federal Government plans, this could occur this summer. We know how well the Federal Government does administering anything, so don’t bet the ranch on this one.
Second, the stock market must show solid increases and a Dow Jones Industrial Average above 10,000. Until some of the wealth lost in retirement accounts returns, people will simply pay down debt or save excess disposable income.
Third, the housing market must not only bottom out, but start increasing. The single biggest household investment is the home itself. While this declines, spending will not increase.
Fourth, is that savings will have to increase to support stringent credit terms. We will see more people simply not buy until they have the cash. This trend will last for years.
I would need to see some more fundamental signs of stabilization. Among them: fewer store closings, steady prices, fewer bankruptcies, and more investment in some of the technologies that will encourage customer loyalty.
Nice pipe dream. Until we see some stabilization in the job market–and the stock market–we are not going to see any upturn in the retail market. The consumers are running scared and are now concerned about every dollar they spend.
There may be some permanent changes taking place in consumer behavior regarding “conspicuous consumption,” “green shopping,” shopping local, re-using and recycling, as well as the marketplace finally adjusting to too many stores in the same category selling the same things. Many of us believe this is more than a matter of being a percentage point or two off for a few months…it has the potential to be much, much more than that.
TNS Retail Forward is bent on projecting a sighting of a happy sales port but it really doesn’t know when or where it will appear. Still it declares that that desired shore exists out there even though it is not clearly sighted yet. The bottom will be reached eventually but we haven’t touched the depths yet.
I don’t think we’ve hit bottom yet. Several of my friends are out of work, and even if they are re-employed soon they’ll have to play catch-up for a while. Until jobs come back and foreclosures end, I don’t see this thing turning around. I also believe that the younger consumer who has never been denied anything before will be scarred by this, and more cautious about spending in the future. I’d like to think it will end soon, but I have to be realistic and think that we have to go further down yet before we can start to rebound.