No Peace, No Profits

Aside from the fact that I really don’t like to shop, I made an extra effort to avoid the mall scene over the holidays, and I was not alone. Market research firm Retail Forward recently assembled a panel of economists and analysts for a forum titled, “Holiday 2002: The Good, The Bad, and The Ugly.” The consensus was that most holiday sales results were downright hideous, with continued paper-bag nastiness projected for at least the first half of this year, culminating in additional retail bankruptcies.

“War is not good for the economy or retail sales,” says Retail Forward senior economist Frank Badillo. “What it does is create only uncertainty that makes people more cautious. Basically consumers then hold back and businesses don’t hire.” Badillo adds that if the Bush administration makes peace with Baghdad and Pyongyang, sluggish retail sales could start to gain momentum, but recent pre-war posturing on all sides makes imminent peace unlikely.

Rising unemployment and higher fuel prices also have taken a huge toll on 2002’s retail sales numbers; nesting, not shopping, seems to be the order of the day as consumer confidence continues to fall. Analysts predict that FAO Schwarz will not be the last major retailer to go bankrupt; more filings are on the way. Kmart Corp.’s bankruptcy is a sterling case study of why merchants cannot stay stagnant in the areas of supply chain management and replenishment. Out-of-stock sale items and a disorganized supply chain made it easy for competitors to eat up Kmart’s dwindling market share.

Cleary, the struggling consumer with his maxed-out Visa can no longer prop up the economy, oversaturated with retail outlets. It seemed like no one could lose in the go-go ’90s; retailers built scores of new stores and DCs that are now empty, with no occupants in sight. Store shutdowns, mergers, and the closing of fulfillment loopholes are in order while apprehensive consumers watch and wait.

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