Brunell: Holiday shoppers gave boot to Scrooge this Christmas
By Don Brunell
Published: January 5, 2016, 6:00am
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It was good to be a merchant this Christmas, but it was even better to be a shopper.
According to MasterCard Spending Pulse, retail sales were up 8 percent over 2014 while the Bureau of Economic Analysis’ price index shows that product prices were 3 percent lower.
A National Retail Federation analysis reveals that while fewer dollars than expected came in because of deep pre-holiday discounts, the volume of purchases were up. While lower prices for sweaters, toys or electronics brought in less per-unit revenue, consumers bought more.
Economist Richard Curtin, who compiles consumer sentiment data for the University of Michigan, verified that trend, finding that overall buying attitudes were solid due to the lower prices. He noted that purchases of durable goods were at the highest level since 2006. Consumers are willing to spend, but, as has been the case since the end of the recession, they continued to dig for discounts.
NRF found a number of factors are behind the lower prices. Inventories were elevated, in part due to the flood of merchandise that came into the country earlier this year after the labor dispute that crippled West Coast seaports ended.
However, much of the extra money freed up by lower gasoline prices has gone to services such as travel and restaurants rather than retail merchandise. That spending came despite the fact that most consumers have seen little in the way of wage increases. Rent, health care costs and even the amount spent on smartphones, tablets and broadband internet service are all higher and are stretching family budgets.
With all this good news heading into 2016, what is the downside? That depends whether you rent space in a mall, have your own store or have a strong online presence
According to RetailNext, which collects data through analytics software it provides to retailers, malls and local shop owners are reeling from on-line sales competition. Sales at brick and mortar stores dropped 6.7 percent the week before Christmas primarily because foot traffic in the malls declined by 10.4 percent.
Shoppers aren’t in the mood to fight the crowds in the malls or hunt for parking spots. They prefer to login into their computers and buy from websites.
FedEx, UPS and the U.S. Postal Service were swamped in December with delivering on-line orders. Unanticipated large last minute shopping and extremely bad weather in the Midwest caused delivery delays.
Sarah Quinlan, MasterCard Advisors said there is a broader trend toward “experiential shopping.” Millennials, who devote over half of their food spending to restaurants, are more likely to spend on “creating memories rather than buying stuff.”
There is another complication for retailers who hire a lot of seasonal workers. There is a move to more than double the federal minimum wage and some governors and lawmakers in states like Washington, California and New York want to hike it to $15 an hour.
Michael Saltsman, the Employment Policies Institute’s research director, found that a sharp minimum wage increase to $12 resulted in layoffs, business closures, reduced hiring and an accelerated move to replace workers with automation.
When you add in increased electricity rates, higher costs for taxes, permits and licenses, and climbing health care and employee benefits expense — and the need to discount prices to compete with internet sales — store-bound merchant are struggling just to survive.
The bottom line is, while politicians can’t do much about the shift to online shopping, they can resist the pressure to pile on costs to brick-and-mortar merchants located in our communities.
Don Brunell,retired as president of the Association of Washington Business, is a business analyst, writer, and columnist. He lives in Vancouver and can be contacted atTheBrunells@msn.com.
