Hold On To Your Hats, Retail Sales Will Be Fragile And Unpredictable
As I read about the September “retail sales surge,” which month-over-month, excluding automobile sales, reported sales to be up 1.5% from August, I had to shake my head. I believe most of our forecast engines are smart enough to recognize a red herring when they see one.
Where do I begin?
I did a decent amount of research and could find no news outlet besides Chain Store Age comparing traditional retail sales in September 2020 to September 2019. Well, with one exception. Apparently, restaurant sales are down 14% year over year with the expectation that they will continue to fall as colder weather drives patrons either indoors, or, absent enough capacity, back home.
Regardless, we know by now that in the pandemic, “average” sales mean nothing. Some retailers have a foot in a bucket of ice, and others have a foot in a bucket of boiling water, rendering the group, on average, “warm.” Consider the following:
- -Sales rose 3.6% at auto dealers. With interest rates near zero, even I’ve been thinking of buying a new car. Truth be told, if I was actually driving anywhere, I’d probably need a new one by now, but my trips are limited to a once-a-month journey to the hairdresser and occasional trips to the pharmacy. I did call my local dealership and asked them to look out for a particular model and color combination. If it shows up, maybe I’ll think about it, but even with essentially free money, it seems silly to buy a cool car and keep it in the garage for 6 months
- -Clothing sales “leaped” 11% because the school year started but were down 12% year over year. Department stores did better than they did in August. Are you surprised?
- -Sporting goods – one of the pandemic’s golden children – were up 18% year over year. I know I paid double the list price for my latest kayak. Will skis have the same surge experience as it gets colder?
- -Other pandemic winners were building materials and garden supplies. Those stores were up a whopping 23.4% year over year. There’s only so long you can stare at your yard or your bathroom needing to be painted before you bite the bullet and finally do those projects you’ve been stalling over
- -Ditto furniture and home furnishings, with a 7.5% year over year comparable increase
- -Electronics and appliances both posted declines. Electronics, no doubt, because the college kids are now back in school and the Zoom-schooled kids have what they need to get by. And apart from the basketball playoffs, sports played to empty seats just aren’t that exciting and that doesn’t bode well for television sales. The categories were down 6.1% year over year.
October may also end up looking pretty, goosed by Prime Day and ancillary events at other retailers, but I still wouldn’t break out the champagne.
Overall, especially considering the squirrely month-over-month numbers, I’d encourage buying restraint. We have no new stimulus bill in place in the US. The savings rate was quite high during the period of the original stimulus and apparently consumers have started spending those savings. They will run out. Heating oil beckons. Many gardens will be covered in snow.
As the weather gets colder and people are spending more time indoors, saddled with “COVID fatigue” we’ll see less mask wearing and social distancing, and we can expect another surge. In fact, as I write this we are in a mini-surge already, and the typical sickness season is not yet even upon us.
So, what CAN a smart retailer do? Certainly not live and die by the published numbers. It’s all about insuring you have an agile and flexible supply chain. The absolute most important thing is to insure you (and your suppliers) are agile. I could be wrong about all my sales predictions. The government could be wrong about everything. The US election could be mellow, or it could lead to riots and protests and store closings all around the country. France is already locking down and limiting the number of people that go to restaurants.
I can’t pretend that I think everything will be fine, here in the US of A. I don’t. Yes, I live in a climate that for many reasons, should ultimately do better than, say, the Northeast or the Midwest. After all, we can go outside. During the summer, it was much more challenging. But there are so many colleges here, so many snowbirds who come with their clothes and germs, that I honestly can’t say all will be well. The owner of a strip club in Miami sued because curfews were still in place after our governor took away local powers to initiate these curfews. He won. Bars (and I assume strip clubs selling liquor) are COVID hotbeds. It’s worrisome.
God knows what the weather will be like elsewhere around the world. Fires, floods, blizzards? I don’t know, and I sure as heck wouldn’t buy product based on today’s weather forecasts. At least where I live, weather forecasts have been inaccurate a lot of the time. If we can’t predict the weather the night before, can we really predict it two months out?
My best advice is, now is the time to get your houses in order. Make sure you have clear directives in place for store and distribution center associates. Meet with local and far-flung suppliers to brainstorm on managing uncertainty. Insure you have appropriate technical support for a work-from-home workforce. Along with that technical support, make sure you have clear lines of communication, so those at-home workers know when new decisions are made. Take care of your frontline workers.
And, hang on to your hats. Despite our “surging” 1.5% sales increase (which we used to call basically “flat,”) assume nothing. The government may not have an appetite to mandate a shutdown, but people aren’t (generally) stupid. They will stay home. Schools will close and open and close again. I can’t even say if we’ll have a full football season.
All I know is, it’s going to be a bumpy ride. Hold on to your capital, hold on to your hats, and hold on to your forecasts. As we sit today, I can honestly say “No one has a clue.” Therefore, BE AGILE.