By Paula Rosenblum, Managing Partner
9/15/2009
Over the past two weeks, much has been published about soft August retail sales. The back-to-school selling season has been used by some to predict and project holiday season doom and gloom. The Wall Street Journal was particularly taut: “Weak Back-to-School Sales Spell Trouble for Holidays.” Then the announcement came today that in fact, August sales were up 2.7%, and not all due to “cash for clunkers.” Having said that… “Back to School” just isn’t what it used to be and none of us have the ability to give enough granular data to forecast engines to predict what sales will be – even in the best of times.
There was a time when school started pretty close to the same time everywhere, at least in the US. The Monday after Labor Day, kids trooped back to classrooms. That usually drove spending up in the two weeks before (time to buy Fall clothes!) and the week after (once school started and teachers gave out textbooks and requirements for the class it was time to buy school supplies). This allowed retailers to make some pretty solid predictions about when demand would spike. All you had to do was keep track of when Labor Day would fall.
But what do you do when school starts in the middle of August, like it does here in Miami? Does anyone feel like going clothes shopping? Do parents really want to troop off to buy school supplies? States try to “goose” traffic by creating sales tax holidays, but getting people into the store when it’s 95 degrees outside is still challenging. And school still starts later in other parts of the country. In Colorado’s Douglas County, where RSR partner Nikki Baird lives, some schools are in session year-round. The school year starts right after Independence Day, and rotates four 3-week breaks throughout the year.
On the one hand, we’re finding that Retail Winners (yes, Virginia, there really still are some over-performing retailers, even in the current economy) are taking input from field personnel in support of merchandising operations. One area where field personnel can certainly be helpful is in providing data on school start and sales tax holiday dates. These dates are not constant: they shift depending on when Labor Day falls. But as a consumer, what do you do when a cold summer finally turns warm in mid-August, as it did in the Northeast? You don’t go shopping, you go to the beach. And then there are singularities – last August, consumers were spending the last of their one-time stimulus checks. While we had some sense of the aggregate amount spent in retail stores, no one has been able to time phase this data effectively. In other words, the new normal in Back to School is that it’s not indicative of much of anything, trend-wise.
In an interview with Barron’s (the September 7th edition), Citigroup Managing Director and Retail Analyst Deborah Weinswig points out the challenges of predicting Back to School sales, along with other important data points on retailers’ use of technology. The article’s a great read and I recommend it highly. It’s rare to find insightful mainstream articles on retail these days. Deborah and I only disagree on one point – the question of pent-up demand for the Holiday season. She doubts it exists. I think the consumer is ready to spend on items she feels add value and a bit of fun to her family’s life. We both agree the high end of the market will be problematic for some time to come.
I know everyone (including Ms. Weinswig) hopes I’m right and she’s wrong. That remains to be seen. But one thing is sure – this is not your father’s Back to School season. That era is gone, never to return.
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