Signs of economy improving in retail?

Mitchell Hartman Jan 7, 2010
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Signs of economy improving in retail?

Mitchell Hartman Jan 7, 2010
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Kai Ryssdal: The big retail chains have been reporting how their stores did in the crucial month of December. And company by company results were mixed. But Thomson Reuters crunched ’em all together for us today and came up with a 3 percent increase overall over December last year, which is, and please — stop me if you’ve heard this phrase before — better than analysts were expecting. So does that mean the rest of retail, and the rest of the economy, are getting better, too? Marketplace’s Mitchell Hartman reports.


MITCHELL HARTMAN: First, keep in mind that last month’s sales are being compared to December 2008, which was a terrible time for retailers, says Ken Perkins of Retail Metrics.

KEN PERKINS: We really didn’t recoup what we gave back last year. So while they’re better, certainly not where we would be relative to two years ago.

And this raises a big question: should we even be using the free-spending years before the recession to benchmark today’s retail economy, and expecting sales to ever reach that level again?

PERKINS: You know, there seems to be this transformational change in the economy where consumers have become more frugal. And certainly consumers cannot use their homes as piggy banks as they did in the mid-2000s to just continue to take equity out and buy whatever they wanted with it.

Economist Sara Johnson of IHS Global Insight says retailers just can’t count on consumers to spend like they used to.

SARA JOHNSON: Consumers are value shoppers. They’re saving more of their incomes, they’re attempting to reduce their debt burdens, and rebuild their retirement savings. So this will be a cautious environment for retailers for several years to come.

One bright spot is online sales, which have continued to grow by double digits even in the recession.

But that hasn’t boosted retail sales overall, says Sucharita Mulpuru of Forrester Research. It’s just shifted sales away from malls and department stores.

SUCHARITA MULPURU: The Web is definitely taking market share away from store-based retailers. Often it’s taking away from some of those weaker retailers that have already gone out of business.

But Mulpuru says healthier retailers like Nordstrom and Best Buy are holding their own. That’s because they also now have extensive Web sites that offer consumers deep discounts, and opportunities to comparison-shop.

I’m Mitchell Hartman for Marketplace.

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