Analysis: Scarred U.S. consumers a hard sell for traditional retail

Wed Jan 1, 2014 6:54am EST
 
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By Steven C. Johnson

NEW YORK (Reuters) - If there was one lesson from this year's holiday shopping season, it is that many traditional retailers are having to work a lot harder to persuade Americans to open their pocketbooks.

A lot of stores had to discount heavily to eke out a modest increase in sales, likely squeezing profit margins in the process.

Some improvement in the U.S. economy and declines in the jobless rate, plus gains in stock and home prices, are failing to resonate with many Americans whose incomes are struggling to catch up to where they were before the financial crisis.

But to many retail experts and economists there are other less cyclical factors at play. Consumers are spending more. Government figures show monthly personal consumption has risen for seven straight months, with November's outlay marking the fastest increase in five months. But they just are not spending in the shopping malls like they used to.

And that means that, even if the economy picks up significantly, retailers of many products could still struggle.

"We are in a something of an evolutionary process, said Bill Martin, founder of data firm ShopperTrak, which monitors foot traffic in about 60,000 retail stores. Americans are spending more online and becoming more careful about what they buy, he said.

Some of this has been unfolding over a long period, although the changes might be picking up pace.

For example, department stores have found themselves on the wrong end of trends for some time. According to data compiled by Reuters, they now capture just $3.37 of every $100 of U.S. retail spending, the lowest since records began in 1992, when the number was nearly $9.   Continued...

 
People shop inside a Target store during Black Friday sales in the Brooklyn borough of New York, November 29, 2013. REUTERS/Eric Thayer