After a dismal holiday shopping season marked by discounts that failed to lure buyers, struggling retailers face what could be a very unhappy New Year — one filled with thousands of store closings and a shakeout of weak players.
That will mean fewer choices for consumers who have money to spend.
“Overall, it was a very weak holiday season and it’s going to flow over to the first half of next year,” said Jeff Mintz, an analyst with Wedbush Morgan Securities.
“Those that survive will be in a better position because the competition will be reduced, but for right now it’s a very difficult time to be a retailer.” In the coming months of 2009, troubled retailers will take desperate actions to stay afloat, including shuttering redundant or underperforming locations and filing for bankruptcy protection to restructure business operations.
Some retailers will join chains and exit the shrinking market altogether, analysts predict.
Roughly 73,000 retail stores might close in the first half of 2009, according to the International Council of Shopping Centers. As store vacancies rise, small shopping centres also could be at risk, said Michael Niemira, the council’s chief economist.
Retailers that don’t have plans to close stores are taking other measures to weather the tough times ahead, including delaying store openings, hiring fewer workers and stocking less merchandise.
“We’re running our inventories very lean because we’re not sure what the consumer behaviour is going to be in the first quarter, and we’re planning weekly promotions,” Disney store president Jim Fielding said. “Our mantra is to control the controllable. We can’t control consumer behaviour, and we can’t control the macro-economy.” Target Corporation has reduced the number of stores it plans to open in 2009 and is heavily advertising the chain’s low prices, spokeswoman Hadley Barrows said. “Sales continue to be challenging, and consumers are really cautious,” she said.
In the new year, “we’re focusing more on the ‘pay less’ side of our ‘expect more, pay less’ brand promise.” Amid concerns about a huge postholiday fallout, retailers still have to fight for customers: In recent years, January has gone from being a clearance month to a revenue-generating month, led by gift-card redemptions and shoppers picking up items for themselves rather than gifts, said Marshal Cohen, chief industry analyst at market research company NPD Group.
But Cohen said many deals being rolled out by retailers “aren’t that much better.” In some cases, markdowns are taken on merchandise that already had been discounted, he said.
“No matter how great the deal is, if I already have it, I don’t need another one,” Cohen said. “Traditionally at holiday time you have a fresh flow of new merchandise. That didn’t happen this year.” Preliminary holiday sales figures released on Friday showed that, as expected, many retailers suffered heavily even as they slashed prices and offered deals to consumers.
Retail sales fell 5.5 per cent in November and eight per cent in December through Christmas Eve, compared with a year earlier, according to data tracker SpendingPulse, a unit of MasterCard Advisors.