Does 2011 Retail Year Signal Turnaround?

It's hard to know what to make of the 2011 holiday retail season. Initial forecasts predicted mediocre sales increases in the 2% to 3% range, but long lines at midnight on Black Friday and strong, discount-fueled initial sales raised hopes that the economy had reached a higher plateau. Then early January brought more sobering news of a December stall, even with the news of 200,000 new jobs that month. The picture appears to be better locally, though still not precisely quantified as local shopping centers continue to gather information about their stores' performance.

Even with the holiday roller coaster, 2011 was a strong year overall. According to the U.S. Commerce Department, national sales rose only slightly, 0.1% to $400.6 billion in December, but the gain was enough to push annual sales to a record $4.7 trillion, a 7.7% gain over 2010. While we said goodbye to Borders and, locally, Woldenbergs closed its doors after 100 years, the survivors offered discounts as early as Nov. 1, while others extended hours.

That didn't prevent major retailers like Target and Kohl's from falling short of their sales targets, but overall most believe it was a strong year and a solid holiday season, especially since increasingly popular gift card sales are not counted until the cards are redeemed after Christmas. "It was a long holiday shopping season," noted Jerry O'Brien, executive director of the Kohl's Center for Retail Excellence at UW-Madison. "Some of the early optimism was probably misplaced, with people thinking that not only did we have that great big burst on Black Friday, but it extended a week longer than some other seasons. I still think the numbers are pretty strong, considering what we've been through the past three years.

"Everybody hoped for more, but there were some good signals that came from it."


Does this have legs?

If December is any gauge, consumer confidence is on the upswing. The Conference Board's Consumer Confidence Index rose almost 10 points to 64.5 that month, up from a revised 55.2 in November – back to levels seen in the spring of 2011.

Carl Landis, regional marketing director for CBL Properties, which operates East Towne and West Towne Malls, believes their final numbers will be solid. He noted that the International Council of Shopping Centers has reported that overall December sales increased about 3.5%, and both centers fared better than what the ICSC reported. "When I look at the holidays for both November and December, both malls did have double-digit increases," he stated, "and for the year, they both ended up positive."

Corey Kautzky, general manager of Greenway Station, said the shopping center experienced a strong holiday season, with some top-performing stores reporting double-digit increases. "A number of retailers offered aggressive sales and promotions that began early in the season, which was a significant factor," she stated.

Skeptics note that stores have to lure people in with discounts, but O'Brien said early discount merchandising would continue even if the economy takes off. "It's going to be very difficult for anyone to push back against that tide," he said. "The numbers on Black Friday and over that weekend were great, so who is going to decide to not open up as early, because obviously that's your chance at market share."

Landis said discount or value merchandising is now a consumer expectation. "They have always pushed that at the consumer, but after the economy took a downward turn around 2008, those were definitely amped up so that consumers became accustomed to it," Landis added. "They still look for that."

O'Brien believes that 60% of retail sales are affected by the Internet in that people are conducting research and comparison-shopping online. "The line between online sales and in-store sales is blurring because of mobile technology," he said. "If I'm standing in the store with my hand-held computer, basically, my smart phone, and I'm dealing with a potential purchase right there, it's not as clear-cut as it used to be."

Based on some encouraging signs, O'Brien thinks 2011 retail growth has staying power. He does not believe Madison retail is over-built, noting there still is room for some niche marketing. He cited recent increases in home sales, which are at the core of retail due to home improvement spending.

In addition, it appears that credit card debt didn't rise significantly, which means there won't be a large pullback when consumers get post-holiday credit card bills.

Beverly Diny of Diny's Jewelers in Madison said her 2011 sales decreased by 10% to 15%, but that hasn't dampened her optimism. The store, which was in some jeopardy of closing in 2009, actually recorded a higher profit last year because it concentrated more on the cost of business.

Diny now has the same upbeat feeling that she had in the early 1980s, shortly after the store opened and the economy was gaining traction. "We started our business in the previous big recession, and I'm sensing some of that experience," she said. "It's instinctual, but you can feel it with people's attitude and body language and their whole being. It's about moving on."

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