The upcoming holiday season is quickly becoming the business equivalent of the movie “Groundhog Day.” Once again we're entering a period when the talk is about a troubled economy and expectations of soft consumer spending.
The plot is familiar. Consumers will likely be cautious and insistent about buying on deal. One retailer, Marsh Supermarkets, just disclosed that half of its revenues are now coming from items on promotion, vs. only 35% two years ago. That's a major shift.
The unemployment rate remains stubbornly high and confounds our nation's leaders. That, along with high household debt levels, drives much of the consumer's value focus.
In some ways, the economy's impact is even more severe this time around. Consider that Tesco recently said it will close 13 Fresh & Easy Neighborhood Market units because of the poor economy. It plans to reopen them when the housing and employment situation in those localities improves. You won't see a more direct link between the economy and store closures than this.
Despite the gloom, there are a few reasons for optimism. Some analysts are hopeful that more inflation will mean operators can pass along higher costs. There's also a feeling that the retail environment is less competitive with more rational pricing. But there are also signs of price aggressiveness from Food Lion and Winn-Dixie, and a recent SN report pointed to accelerating price competition in New England.
There are other things to be upbeat about. Some retailers are still experiencing meaningful growth. New York-based Internet grocer FreshDirect just tripled its presence in New Jersey by adding 29 new communities, representing a notable vote of confidence for online retailing in general. Iconic Ohio retailer Jungle Jim's will finally open a second store. Fairway Market, a mainstay of Manhattan's Upper West Side, will launch an Upper East Side location.
Retailers are also pushing forward with marketing innovation. Fresh & Easy received such positive feedback about its kid-friendly Goodness line that it's now mulling how to expand the program. Canada's Loblaw Cos. has unveiled dedicated mobile phone shops in 500 of its locations, making it one of that country's leading sellers in this category.
United Supermarkets of Texas has introduced a holiday campaign in which shoppers can personalize wine labels with a photo or unique design. That program, which is twinned with in-store events, appears to take a page from the personalized cake business.
It would be easy to go on, but the point remains the same. Some operators are plowing ahead with growth and innovation despite economic gloom. These initiatives may not be enough to move the industry's needle for the holidays, but the momentum should help boost individual retailer performance going forward.