Tag Archive for 'Economy'

Positive Retail Comp Sales – A Good Sign? It is All Relative

Published on February 12, 2010 in Ed Borden. 0 Comments Tags: , , , , , , , , , .

Ed Borden, Pitney Bowes Business Insight

The monthly reports of retail year-over-year comp (comparable sales) is often viewed a strong sign of the health of retailers; however, the recent positive gains are being plotted against the sales performance of 2009 — not a banner year for retail sales. While the January-over-January gain of 4.7% is an encouraging sign that the industry is recovering, the sales remain significantly lower than the volumes of even two years. As quoted from blog article Retail Sales Advance the “Year-over-year numbers, though, often tell you as much about conditions a year ago as they say about current conditions.”

Like the Retail Sales Advance article discusses, PBBI has also directly witnessed through our retail and restaurant client relationships that change sales comp numbers without historic context can be misleading. Moreover, the shape and size of this retail recovery is not being share equally among all retailers or even amongst all retailers in the same retail specialties (e.g., home improvement, electronics, and apparel).

The graphs below depict the national historic trends in total retail sales, and consumer confidence and sentiment. Naturally there is a link between the consumers’ spending and the consumers’ feelings towards spending — the peaks and valleys generally follow the same trend. Even though none of the information provided in the charts is all that new, the graphical representation of this information clearly shows just how hard this recession has affected retailers. So when you hear great news about the retail sales recovery, just know it is all relative.

US Retail Sales

US Retail Sales

Consumer Confidence and Sentiment

Consumer Confidence and Sentiment

Year-Over-Year Change in Retail Sales

Year-Over-Year Change in Retail Sales

No Need for Discounts? Let them eat Lobster!

Published on December 10, 2009 in Eric Steckling. 0 Comments Tags: , , .

Eric Steckling, Pitney Bowes Business Insight

In August 2009 Sarah Gilbert of WalletPop.com blogged about how “Panera made news by not discounting its bread” (see link) and goes on to lambast the chain for not lowering prices despite an industry trend of discounts, promotions, and new low price offerings.  Even though the economy is in a severe depression, not all retailers and restaurants are feeling the pinch evenly.  Panera’s strategy can be summed up by a quote from CEO Ron Shaich when he said that he’s “focused on the 90% [of Americans] that are still employed”.

The trend of price breaks may be a hasty kneejerk reaction to slipping sales.  Many restaurant operators argue that discounts hurt the bottom line and largely fail to bring more customers in the door.  It’s reasonable to understand why discount sellers are posting modest gains, as previously higher-end consumers downgrade and loyal bargain hunters continue to patronize the low priced purveyors.  Companies such as Walmart, Costco, TJX and McDonalds have all reported increased sales.  Panera’s strength through the recession begs the bigger question; how are some non-discount retailers and restaurants relatively unaffected by this massive economic downturn while others struggle to keep their doors open?

My guess is that there is a reason behind every success. A particular store may have a customer base that is relatively unaffected by job losses, or in an area(s) with a relatively stable economy (Texas), or are benefiting from folding competition.  In turbulent times such as these consumers often change their behavior so quickly that retailers/restaurants do not have time to respond to the trend before the fickle consumer changes their mind.  It is evident that in troubled times with economic factors to numerous to list, that there are winners and losers, with the losers far outnumbering the winners…

Ms. Gilbert predicted that the press around the company’s growth (and lobster offering) “will only affect it negatively.” Panera’s third quarter earnings report prove Sarah’s predictions wrong; a sales increase of 35% over Q3 2008 can hardly be described as “a fluke”.

Some Good Stimulus News

Published on December 9, 2009 in Shawn MacDonald. 0 Comments Tags: , , , .

Shawn MacDonald, Pitney Bowes Business Insight

Pork. The “other” white meat or a “four-letter” word? Merriam-Webster’s Online Dictionary defines as:

1. the fresh or salted flesh of swine when dressed for food
2. government funds, jobs, or favors distributed by politicians to gain political advantage

Meateaters and vegetarians can both agree that the second definition leaves a bad taste in your mouth.

Admittedly, I opposed the government stimulus bill passed earlier this year because it seemed fraught with funding for “pet projects” so legislators could return to their districts and prove how hard they have been working for their constituency. And I do mean “pet” projects such as $2.5 million for a waterfront duck pond park and $200,000 for a dog park in Hercules, California or $16.5 million to save the San Francisco Bay area habitat of the salt marsh harvest mouse. While these may be very worthwhile causes, how many jobs will be created?

However, I have just discovered a stimulus-funded success story that you can sink your teeth into, literally! That’s right, I am talking about food here. As reported by Supermarket News, a 55,000-square-foot Stop & Shop grocery store will be the focal point of Arverne by the Sea, a mixed-use development in the south Queens community of Rockaway Beach. This development will be funded in part by $5.5 million in tax-exempt bonds made possible through the federal stimulus program. This Stop & Shop will not only fill a retail void – an estimated $528 million in consumer spending is lost annually to competing retail centers outside the Rockaways – but could also create upwards of 175 jobs as well.

The once-thriving waterfront community was designated as an Urban Renewal Project in 1964, and is emblematic of the decay within many urban communities throughout the country. The loss of the retail sectors within these communities have long been a challenge for local authorities. Urban consumers do have money to spend, accounting for $122 billion in retail sales in 2005. However, research also indicates a $42 billion “retail gap” still exists within urban communities, the majority of which can be attributed to the lack of supermarkets. To underscore this last point, more than half of the Detroit residents have to travel twice as far to find a grocery store than a fast-food restaurant.

While there are true impediments to closing the retail gap (scarcity of developable land, restrictive zoning, infrastructure, and politics), grocery chains must also overcome some powerful myths associated with doing business in these underserved areas. These myths include the closure of other local businesses, rampant crime, local residents will not get majority of jobs, and the need for special subsidies to ensure survival.

The Great Atlantic & Pacific Tea Company’s (A&P) Pathmark banner embraces inner-city opportunities, and in the early 1990s formed a partnership with the New Community Corporation to develop a 44,000-square-foot supermarket in the Newark, New Jersey Central Ward. Due to years of pent-up demand, this store set sales records on its first day of operation and within 2 years became Pathmark’s most profitable store. Hopefully, Stop & Shop will find similar success at Arverne by the Sea.

The stimulus package could have been another tool used by local authorities to recruit supermarket operators to underserved areas. Given all of the negative press surrounding the stimulus bill, it is comforting to find a truly “stimulating” story among the $787 billion appropriation. No doubt, a lot of “pork” was doled out in the stimulus bill, but did you know that the Pilgrim’s Pride Corporation received $70,000 to deliver 80,000 pounds of frozen chicken during July 2009 creating zero jobs? Now, I gotta “beef” with that!!

Attack Back With Financial Literacy

Published on November 11, 2009 in Brian Diepold. 0 Comments Tags: , , , , , , .

Brian Diepold, Pitney Bowes Business Insight

You couldn’t go ten minutes at BAI Retail Delivery without hearing about – or talking about – NSF fees. It’s natural that it would be a hot topic as it is certainly getting its share of media and congressional attention these days. Richard Davis made a great point that the industry needs to educate Congress and the public that these fees are not necessarily immoral – after all, as he so nicely pointed out, we are providing a service for the consumer and we are charging for that service.  I agree, and we need to take Mr. Davis’ advice that we need to tell the story in a more positive light.

I also think it’s important that we do more to educate our consumers. This economic crisis is very tightly linked to the lack of economic education and financial literacy in our country. We don’t do enough as a society to arm our population with the necessary tools to think about the world the same way we do as bankers, financial advisers, and economists. Not everyone needs to have a passion for these topics, but they certainly need to have a basic understanding in order to manage their personal finances. The national and state councils on economic education do everything they can to support these initiatives for our youth, but we also have an adult population that lacks this knowledge.

Let’s take it upon ourselves to help solve that problem. Banks could generate goodwill by offering simple educational programs at the point of sale. Let’s take 15 minutes to teach a new customer how to use their checking account. This may just allow them to avoid the extra fees down the road, while at the same time allowing you to guide them to being a profitable customer in other ways.

Not only is it good for the customer, but it would have to go a long way to convincing Washington that we are serious about addressing the issue ourselves – without Congress imposing their own solution.

Worst case – you are the only bank in your market that makes this effort. In that case, it should allow you to differentiate your offering and build that goodwill or brand value with the market. It’s a win-win.