Black Friday came and went, closely followed by online’s shopping equivalent “Cyber Monday.” Even if the reviews were mixed, one or two mega shopping days do not a retail recovery make. Before Black Friday, the national economic forecast for retail was a bit more optimistic than this same time last year. Then again, that may not be saying much. The economic benchmark for most retail merchandise is most often tied to “GAFO” sales. The acronym stands for General Apparel and Accessories Furniture and other sales – such as book, music and sporting goods. Non-GAFO retailers include drug stores, grocery stores, restaurants and home improvement centers. Some sections of the U.S. register higher GAFO sales per household compared to other regions (i.e. the Northeast). The question is whether Connecticut retailers are well-positioned this holiday season to rebound from last year’s dismal numbers. Few would argue that there is a direct correlation between the rate of unemployment and the rate of consumer spending. Time and time again, the nexus between an increase in consumer confidence and an increase in the availability of jobs has remained a truism.
Is it really the case that as goes the nation so goes Connecticut – at least regarding retail trends? Generally, Connecticut has fared a bit better than most states. Take this statistic for example: As of October 2009, the unemployment rate of the U.S. as a whole was hovering around 9.5%, whereas the rate in Connecticut was around 8.3%. To be sure, there are pockets in Connecticut that exceed the national rate (Waterbury at 11.2%), or closely mirror the national rate (Willimantic/Danielson at 9.3%), but the rest of Connecticut is sitting at or below the national unemployment rate. According to recent statistics from the Connecticut Department of Labor, Connecticut’s nonfarm employment in October increased by 1,000 jobs from the same time a month ago. Baby steps yes, but forward steps nonetheless.
So with that as a backdrop, what then should Connecticut retailers and developers expect this holiday season? Let’s take a look at some empirical data from some leading researchers in the field.
ICSC
The International Council of Shopping Centers (“ICSC”), the global trade association of the Shopping Center industry, has recently come out with some positive statistics regarding retail chain store sales. One such research showed a 2.1% increase in comparable store sales from October 2008 to October 2009. This was a significant increase primarily because it was the second consecutive positive monthly increase after 13 months of negative sales. ICSC anticipates that November 2009 sales will rebound to between 5 to 8 percent from November 2008. Those are gaudy numbers, and if that prediction comes to fruition, there is a good chance that Connecticut retailers may be in the black this holiday season.
SHOPPERTRAK
ShopperTrak, the global shopper traffic counting technology and data management company, is a bit less sanguine than ICSC in terms of its holiday forecast. Its November 14, 2009 National Retail Sales Estimate (NRSE) report shows a paltry .7 percent rise in GAFO sales compared to November 2008. This inched up to .9 percent for the week ending November 21, 2009, and a day after Black Friday, ShopperTrak reported that Black Friday retail sales increased by one half a percent when compared to a year ago. Again, given last year’s dismal numbers, retailers and developers may have some reason to be optimistic that consumers will open up their wallets – even a smidgen – this holiday season.
RETAIL TRAFFIC
Retail Traffic, which considers itself as the leading authority on retail real estate trends, has a slightly upbeat report reflecting an increase in leasing activities for Shopping Center REITS this third quarter. Specifically once-vacated “big box” spaces traditionally leased by retailers such as Best Buy, Kohl’s, Bed Bath & Beyond, etc., – all of which populate the retail landscape in Connecticut – are slowly finding tenants.
The mood of retailers nationwide is one of “guarded optimism” this holiday season. This sentiment was echoed by Tim Phelan, President of Connecticut Retail Merchants Association (“CRMA”), whom I spoke to a few days ago: “Retailers are guardedly optimistic about this year, they are hoping for the best.” Phelan was also in agreement with the premise that when it comes to the nationwide forecast and prospect of a rebound this year, “Connecticut is not so much out of step with the rest of the retail economy.”
So although cautious optimism abounds from the leading retail trade indicators, the consumer always gets the last word. An increase in leasing activities as suggested by Retail Traffic will surely be negated if shoppers do not visit those freshly minted stores and spend some greenbacks. An increase in traffic flow without a commensurate increase in consumer spending may be an indication that consumers are expecting a bigger discount at their next destination and will hold out for the right bargain even if Grandma does not get that soon to be discounted sweater on Christmas day. (Just saying)
BIGRESEARCH
These respective forecasts become more germane when viewed in conjunction with the mindset of the consumers who do intend to spend those hard earned dollars this holiday season. For guidance into this arena, we turn to BIGresearch, one of the preeminent consumer market intelligence firms, which is based in Worthington, Ohio. One of BIGresearch’s pre-holiday shoppers surveys revealed a few proclivities to which retailers should take note: 43.3% of shoppers listed “Sales/Price Discount” as the most important factor regarding where they intend to shop this holiday season. This was followed by “Merchandise Selection” (21%), followed by “Everyday Low Price” (12.7%). Only 11.8% chose “Merchandise Quality” as an important factor. Not surprisingly, when asked where they plan on shopping this holiday season 70% selected “Discount Stores” followed by “Department Stores” with 56% (shoppers were asked to make more than one selection). With regard to the issue of how much they intended to spend in holiday gifts this year, the median average across the four regions of the U.S. was $509.56 per capita. The Northeast region led with $578.03 per capita, followed by the South with $523.36, then the Midwest at $474.63, followed by the West with $462.23 per capita. These spending demographics cannot be a bad thing for Connecticut retailers.
Using data from BIGresearch, Forecast IQ, a service from Prospect Technologies, LLC, predicts that retailers who offer discounts and those that sell youth-oriented merchandise will most likely experience increases in same store sales in the next couple of months. In Connecticut, this means that the TJX Companies stores (TJMaxx, Marshalls, and Home Goods), Aeropostale, BJ’s, and Costco will “almost certain” or “likely” experience positive growth in sales, whereas the likes of Abercrombie & Fitch, JCPenney, Neiman Marcus, Nordstrom, Old Navy, American Eagle will “almost certain” or “likely” see declines in sales through December 2009.
As Phalen commented, Connecticut retail consumers are in many respects no different from the rest of the country. Granted, there are certain regions in Connecticut – Fairfield County, Hartford County – where some high end retailers may continue to do just fine because of affluent consumers. However, it is also the case that the majority of Connecticut’s retail consumers are slowly recovering from the massive hangover that is the U.S. recession, and even if they are predisposed to spend a few extra dollars this holiday season, prudence will no doubt dictate their overall spending habits. So for all the retailers and developers out there “Happy Holidays!” – at least it’s not 2008!