The current economic climate makes life hard for retailers. The economy seems to be stabilizing but what will happen for the holiday season? Will consumer spending bounce back or will sales be slow? For many retailers, now is too late for adjusting their plans. Long lead times force them to place their bets for Christmas early in the summer. An article in today’s Chicago Tribune (Retailers continue defensive inventory strategy) suggests that many retailers playing it conservatively. As the article explains:
The amount of cargo coming into the U.S. — a proxy for retail inventory — is at its lowest level in at least seven years, according to a report last month from the National Retail Federation and IHS Global Insight. Import cargo volume at the nation’s major retail container ports is forecast to fall 19 percent in 2009 from last year.
Here is a graph (from the same article) that illustrates the drop in shipments:
All of this leads one analyst to observe:
“If consumers want something, they are going to have to jump on it,” said Madison Riley, senior partner at Kurt Salmon Associates. “Retailers are more willing to have a sale walk [away] than be left in an over-inventoried position.”
An article in today’s Wall Street Journal hits on similar themes (Weak Back-to-School Sales Spell Trouble for Holidays). However, it also points out that the inherent uncertainty of this season puts a premium on flexibility:
Some companies are hedging their bets with ways to quickly restock shelves if shoppers show interest in a specific product. Gap, for instance, maintained a stock of fabric used in a new premium denim line, which hit stores in August, allowing it to quickly fulfill reorders when smaller sizes of the dark jeans sold more quickly than expected.
What’s left unanswered in the story is where the Gap is making these jeans. One suspects that the need for quick response on these items leads them to some sort of near-shoring strategy.
Finally, another way to deal with uncertainty is better forecasting. The British grocery chain Tesco apparently has taken to generating its own weather forecasts (Tesco, British Grocer, Uses Weather to Predict Sales, New York Times Sept 1). By having a better estimate of the weather – and being able to tie weather changes to shifts in food consumption – Tesco hopes to avoid both lost sales and spoiled food.