So if you’ve been under a rock, you may not have heard that retail sales were down across the board in October anywhere from 16-28% for the major stores. Yes, it’s bad; no question.
It looks like the National Retail Federation’s holiday projection of an increase of 2% is bound to be revised downward. Scary times for retailers? Certainly.
But let’s look at what was going on in October. Every hour on the hour updates of the end is near on every TV, Internet site, or radio. How far would the stock market fall? How many people have lost jobs? How many banks are failing? Bludgeon people over the head with fear and tell them how much money they have lost from their home values to their pensions and big surprise, people snap their wallets/purses shut.
Does that mean they won’t shop again? No, it means they are sitting on the sidelines. First thing that had to be decided was the election. Now that is behind us with a clear landslide for the winner. Hope returns.
Doesn’t mean the bad news would stop. The next day we heard that the Detroit automakers are burning through their capital. The saying used to be as GM goes, so goes the nation. Of course people are worried.
But again, we’re all waiting to see what it will take to get some normalcy back in the stock markets, the banking industry, the auto industry, etc.
Some feel Main Street hasn’t begun to feel the effects. I think they are wrong. Many clients report slower traffic counts. But some are still having their best year ever – and they are in businesses that should be hurt – home furnishings, window coverings, and flooring.
I was filming at MSNBC this past Thursday so I had to stop at Macy’s Herald Square. 
It was incredible. The store was full of shoppers.
Full.
Yet we still had the group of three employees everywhere, talking, laughing, doing everything but helping customers. I stopped at a display of gloves. I need a new pair as its getting below freezing in upstate – I had a need. I went over to the Isotoner Glove display. A sign “30% Off.” Above that another sign “Use your Macy’s card and get an additional 15% off.” I picked up a pair and tried them on, went to the counter where a pleasant woman was standing at the register. “Do you have your coupon?” “Uh, no.” “That’s too bad, if you did you would have gotten an additional 15% off.” Now I got them for $20. And I could have gotten them for $17? WOW Macy’s CEO Terry Lundgren, I was ready to buy them at the $35 tag.
Can you say desperate?
Mind you the store was full of people with no employees engaging customers. Could my clerk have said something like, “Yes, these are such a good deal you could buy a pair to give as gifts for the holidays. And since they are one size fits all, you don’t have to worry about sizing.”?
Sure they could. Whenever I was working retail I used the sales to increase tickets, not decrease them. “All our shirts are on sale for 20%” was the impetus to upsell three shirts, not two.
Walking further into the store I spotted a sea of more 30%, 40% and a disturbing amount of 50% off signs – all on first run merchandise.
It’s like 50% off is the new 20% off. At that point, why don’t you just say, “Can you get this crap out of here for us?”
Did you see the Dodge truck sale on TV during September? 40% off. They will never be able to establish value of $35,000 when we’ve seen them all go down to $20,000.
The instinct to cut prices when times are tough is one to avoid. When demand is down, you typically are cutting your profits without generating additional sales. That means you probably are still selling the same numbers of units but without additional profits.
I learned this in the hotel business when the owner wanted to cut rates to increase occupancy. What happened? Occupancy moved up 2%, which was insignificant. What did happen is the people who would have paid more got a deal and profits fell. I can’t bring people to the beach in the winter with a discount. What we needed to do was get more money out of those who came.
And you know what? We were able to double our average daily rate, put more money into the rooms to justify higher rates and occupancy and profits soared. But it took discipline and avoidance of the discount philosophy so prevalent in the news today.
We are not a nation of Wal-Mart shoppers, despite what their incredible PR campaign has been able to influence the media to tout.
We are a nation of shoppers looking to discover something new, something different and presented in such a way we have to have it. If you aren’t willing to commit to that, you’ll be just like Macy’s – loaded with employees, with customers and with discounts but no profits. That’s nothing less than a complete collapse of a selling culture, not customers.
In my book, You Can Compete: Double Sales Without Discounting, I detail how I increase sales without spending a lot on marketing but on the people in the store. It’s a formula that has helped thousands of stores compete from some of the biggest to the smallest – whether economic news was good or bad. It might help you too.
In today’s New York Times even liquidators are wondering what they can offer. “‘We’re going to have to be extremely aggressive in terms of our discounting because we’re going to have to beat every other retailer that’s already been offering 70, 80 percent off,’ said Jim Schaye, chief executive of Hudson Capital Partners, which has run liquidation sales for bankrupt retailers like Linens ’n Things, Mervyns and Whitehall Jewelers.
