Blog: Leonie BarrieSlumping September sales

Leonie Barrie | 9 October 2008

As the global financial meltdown accelerated to fever pitch in September, worried consumers seem to have responded in the only way they know how: by scaling back their own, already constrained, spending to the bare minimum.

Despite the best efforts of retailers to put some life back into the market with special offers and promotions, it seems shoppers have finally gone into hiding – as the latest monthly sales results show all too clearly.

Luxury stores, mall-based apparel stores and department stores continue to be the hardest hit, while discount retailers like Wal-Mart Stores are among the few beneficiaries as shoppers’ focus their spending on necessities like food and fuel.

Perhaps the biggest question now is how much worse is it going to get? Consumers have already spent the best part of this year contending with rising gas and food prices, job uncertainty and the ongoing housing downturn – and now they have fears about job security, their retirement portfolios, loans and credit lines to worry about as well.

It’s a grey area for retailers too as they hurtle towards the holiday season, traditionally the biggest shopping period of the year.

Do they offer bigger discounts to persuade shoppers to part with their money? What will be the impact of more markdowns on their gross margin? How much more can be shaved off costs, inventory and capital expenditure in an attempt to shield profits? And how much spring merchandise should be ordered given the perilous state of consumer spending?

The rescue plans proposed by the US and other governments over the past week seem to have restored some confidence to the markets. But even so, with economists warning there will be no fast or easy solution to the health of the financial system it seems retailers have little Christmas cheer to look forward to either.



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