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Photo of Scott Olson / Getty Images
The autumn of 2018 has been unusual in many ways. The weather is unpredictable with temperatures ranging from the 80s to the 50s in New York this week. As a result, the business is uneven and yet, the consumer is prone to spend. How will the season unfold? I think of some of the worrying issues.
Sears bankruptcy
Sears Holdings has just sunk into bankruptcy. About 450 stores will close, leaving only 300 stores open. With the middle class already suffering, the loss of 80,000 to 90,000 jobs, with partners whose pension funds may not be fully funded, is significant. The effect will also be visible in communities where the Sears closure will plunge a corner of many malls into the dark and stores surrounding the Sears unit will suffer. This will likely reduce client traffic in these centers. The absence of Sears stores will allow competitors to resume business. However, it is likely that Sears stores will remain open until Christmas, which will wreak havoc among competitors as the company is likely to sell out of business at Christmas time.
Inflation
All economic indicators show that inflation has arrived. All companies will experience it. Rising interest rates can be a deterrent to physical expansion and will not improve job prospects. The retail industry will see inflation increase in all commodity classifications. This is due to the new import tariffs that have been imposed. Current spending by consumers on a tight budget will fall. However, retail sales estimates for Christmas are rather optimistic (I predicted an increase of 4.8% and the National Federation of Retail Trade posted an increase from 4.3% to 4.8%) . The sentimental holidays induce impulsive expenses. However, post-Christmas sales are likely to suffer from the lack of discretion of the average consumer.
Climatic instability
The weather has been capricious. It was hot and humid. Certainly, way too hot for anyone to think of boots, coats and gloves. Much less to buy any winter equipment. The winter merchandise is on the shelves as new goods arrive. Markdowns are inevitable. I am personally concerned about the human and financial disasters caused by hurricanes on people in the southern United States. I was moved by the story of a man in Florida who was pushing his 90-year-old mother in need of food, water and shelter. Retailers in the disaster areas suffered unimaginable losses. They were caused by the loss of their stores, their activities and their logistics. This meteorological impact is a trend, not an outlier. In 2017, there were hurricanes of $ 16 billion. This year does not seem safer and the number of storms of one billion dollars is increasing at an alarming rate.
Increased freight costs
Trucking prices in the United States have increased. Although there was a brief transportation recession in 2015-16 with a decrease of about 3%, 2017 has experienced a surge and there is no payment in 2018. Prices Trucking in the United States is on the rise. They had to increase from 6% to 8% this year. The shortage of US truckers has pushed freight costs up for everything from grain to toothbrushes, according to one source. The highly reputed Cass Linehaul Truckload Index jumped in August by 11.1% and the estimate of the cost increase for the current year now stands at 12%. This will have a negative effect on the profits of all retailers, especially online retailers who often do not charge a delivery fee.
Temporary help
With a US unemployment rate below 4%, it will be difficult to find temporary workers. This will have a major impact on retailers during the Christmas sale period. Macy's has announced that 80,000 people will join its active Christmas population. Kohl's, Walmart, Amazon and many others have already started interviewing, recruiting and training for the critical period of sales. Walmart and Amazon have increased their minimum wage and I'm sure others will follow. The challenge is to have the right partners in the right sector for the Christmas sales period.
Internet sales
I expect Internet sales to increase again this year. Many luxury brands now see Internet sales as an integral part of their business, which is rewarding and growing. For example, LVMH's La Mer e-mail sales, Louis Vuitton or Estée Lauder, are growing rapidly, allowing customers to easily buy their favorite products. Every year, it becomes more and more difficult to maintain a viable presence, which is important for increasing market share. However, this can be done with imagination, technology and vision for the future.
I'm optimistic that this Christmas season–full of sales days (Black Friday, Cyber Monday) and many other events–will be a good with a solid increase of 4.8%. If this is the case, retailers will have a profitable season and relatively clean stocks. As former Federated Department Stores chairman Howard Krensky once told me, he wants stocks to be lean and clean at the end of a season. The critical points discussed above are challenges to be met. Some retailers may postpone price increases to next year, they may set a minimum for free shipping, they may have to schedule more overtime. It will be an exciting time.
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Photo of Scott Olson / Getty Images
The autumn of 2018 has been unusual in many ways. The weather is unpredictable with temperatures ranging from the 80s to the 50s in New York this week. As a result, the business is uneven and yet, the consumer is prone to spend. How will the season unfold? I think of some of the worrying issues.
Sears bankruptcy
Sears Holdings has just sunk into bankruptcy. About 450 stores will close, leaving only 300 stores open. With the middle class already suffering, the loss of 80,000 to 90,000 jobs, with partners whose pension funds may not be fully funded, is significant. The effect will also be visible in communities where the Sears closure will plunge a corner of many malls into the dark and stores surrounding the Sears unit will suffer. This will likely reduce client traffic in these centers. The absence of Sears stores will allow competitors to resume business. However, it is likely that Sears stores will remain open until Christmas, which will wreak havoc among competitors as the company is likely to sell out of business at Christmas time.
Inflation
All economic indicators show that inflation has arrived. All companies will experience it. Rising interest rates can be a deterrent to physical expansion and will not improve job prospects. The retail industry will see inflation increase in all commodity classifications. This is due to the new import tariffs that have been imposed. Current spending by consumers on a tight budget will fall. However, retail sales estimates for Christmas are rather optimistic (I predicted an increase of 4.8% and the National Federation of Retail Trade posted an increase from 4.3% to 4.8%) . The sentimental holidays induce impulsive expenses. However, post-Christmas sales are likely to suffer from the lack of discretion of the average consumer.
Climatic instability
The weather has been capricious. It was hot and humid. Certainly, way too hot for anyone to think of boots, coats and gloves. Much less to buy any winter equipment. The winter merchandise is on the shelves as new goods arrive. Markdowns are inevitable. I am personally concerned about the human and financial disasters caused by hurricanes on people in the southern United States. I was moved by the story of a man in Florida who was pushing his 90-year-old mother in need of food, water and shelter. Retailers in the disaster areas suffered unimaginable losses. They were caused by the loss of their stores, their activities and their logistics. This meteorological impact is a trend, not an outlier. In 2017, there were hurricanes of $ 16 billion. This year does not seem safer and the number of storms of one billion dollars is increasing at an alarming rate.
Increased freight costs
Trucking prices in the United States have increased. Although there was a brief transportation recession in 2015-16 with a decrease of about 3%, 2017 has experienced a surge and there is no payment in 2018. Prices Trucking in the United States is on the rise. They had to increase from 6% to 8% this year. The shortage of US truckers has pushed freight costs up for everything from grain to toothbrushes, according to one source. The highly reputed Cass Linehaul Truckload Index jumped in August by 11.1% and the estimate of the cost increase for the current year now stands at 12%. This will have a negative effect on the profits of all retailers, especially online retailers who often do not charge a delivery fee.
Temporary help
With a US unemployment rate below 4%, it will be difficult to find temporary workers. This will have a major impact on retailers during the Christmas sale period. Macy's has announced that 80,000 people will join its active Christmas population. Kohl's, Walmart, Amazon and many others have already started interviewing, recruiting and training for the critical period of sales. Walmart and Amazon have increased their minimum wage and I'm sure others will follow. The challenge is to have the right partners in the right sector for the Christmas sales period.
Internet sales
I expect Internet sales to increase again this year. Many luxury brands now see Internet sales as an integral part of their business, which is rewarding and growing. For example, LVMH's La Mer e-mail sales, Louis Vuitton or Estée Lauder, are growing rapidly, allowing customers to easily buy their favorite products. Every year, it becomes more and more difficult to maintain a viable presence, which is important for increasing market share. However, this can be done with imagination, technology and vision for the future.
I'm optimistic that this Christmas season–full of sales days (Black Friday, Cyber Monday) and many other events–will be a good with a solid increase of 4.8%. If this is the case, retailers will have a profitable season and relatively clean stocks. As former Federated Department Stores chairman Howard Krensky once told me, he wants stocks to be lean and clean at the end of a season. The critical points discussed above are challenges to be met. Some retailers may postpone price increases to next year, they may set a minimum for free shipping, they may have to schedule more overtime. It will be an exciting time.
