The correct question may not be will
consumer confidence and demand
support retail growth but where that
growth will occur. Aggregate spending
by consumers has increased consistently since its nadir in 2009. Personal
income growth has been disappointing
but households have lowered savings
rates to fund renewed spending.
However, not every retailer has benefited. A disproportionate share of new
dollars has been spent online, heavily affecting retailers such as
big boxes, bookstores, etc. More than 30% of new spending
over the past three years has occurred online.
However, some retailers are benefitting. Home furnishing and
improvement stores are among the retailers that struggled during
the housing downturn, when investment in housing and complementary products plummeted. As housing has turned a corner,
these retailers have experienced a relative surge in sales activity.
Furniture stores have seen gains surpassing online sales, the
only traditional retail category to manage that feat. Another successful model has been to focus on perishable goods. Many
stores such as Wal-Mart, Dollar General (including the new
“Dollar General Market”) and some pharmacies are dedicating
more floor space to perishable goods. Meanwhile, tenants such
as Wegman’s and Whole Foods continue to flourish. —Jonathan
Hipp, Founding President and CEO, Calkain Cos.
The golden age of shopping started in
1956, when the nation’s first fully-enclosed mall opened. Between 1956
and 2005, about 1,500 malls were built.
No new mall was built between 2006 and
2014 and many malls have been shut
down. Deadmall.com contains hundreds
of malls neatly sorted by state. Many
leading industry analysts predict that half
of all of the nation’s malls will close in the
next 10 years. Not because consumer
confidence and demand for goods aren’t strong, but because consumer habits have changed as a result of the Internet.
Ten years from now, it’s highly likely that the large majority of consumers will be shopping via the Internet and the need for brick and
mortar retail will be substantially lower than it is today. The experts
who track store openings and closings have been forecasting for
more than a decade that the day was coming when American retailers would have to pay for building way too many stores. That day of
reckoning has arrived as the news is filled every day with store closings and there are surely a lot more to follow.—Ann Hambly,
Founder & CEO, 1st Service Solutions Inc.
Barring any major economic or climate
surprises, yes. Consumer confidence is
rising slowly and steadily. Jobs are
coming back, again, slowly and
steadily. With home prices rising again,
and mortgage rates inching up, retail
stores won’t be competing as much
with buying a house. So people will
have a bit more money that they’re willing to put toward discretionary goods.
And the pent-up demand from this last
quarter should stand us in good stead. —Faith Hope Consolo,
Chairman of the Retail Group, Douglas Elliman
I believe that consumer confidence and
demand for goods will hold up, however
fragile. Availability of jobs will continue to
be the major issue driving this confidence and will keep retailers in the black.
I do believe that shoppers are smarter
today in utilizing the “clicks and bricks”
method of evaluating the pricing, getting
better peer reviews and executing a sale,
so retailers will need to continue to
sharpen their pencils and be creative in
inventory and product selections. —Richard J. Walter, Senior
Managing Director, Promontory Interfinancial Network LLC
Very timely question in the face of the
announcement of April jobs numbers of
288,000 new jobs. This was significantly
more than the 218,000 jobs expected. It
is noteworthy that only 15,000 of these
new jobs were governmental—federal,
state or municipal. The balance of
273,000 jobs were in the private sector;
75,000 came from business services.
The Conference Board said earlier
this month that its confidence index
dropped to 82.3 from a March reading of 83.9. Despite the
decline, consumer sentiment for the past two months has been
at its strongest levels since January 2008, when the Great
Recession was just beginning.
Finally the answer is “Yes.” So, for the first time in almost six
years, there is verification that the economy is moving in the right
direction, credibly without political spin. We will have to watch and
wait, closely, to verify how the retailers experience these very positive developments. See you at ICSC! —Sean O’Shea, Managing
Director, the O’Shea Net Lease Advisory of BRC Advisors
ASK THE ADVISORS
Each month, the editors of FORUM pose a topical question to our Editorial Advisory Board members.
Will consumer confidence and demand for goods hold up well enough to
support retail growth?