Low retail sales in apparently healthy economies is confusing many retail observers and the Queen Victoria Market is not immune. Forgetting the current federal election for a minute we need to ask why retailing is in the doldrums and the answer is not what many traders are thinking.
In Australia, we have essentially a healthy economy - Interest rates are low, oil prices are low, property values are high, and the stock market is a little jittery but doing OK. Ask around our QVM trader body and you will find a number of different opinions on who to blame for the retail recession. Top of the list is usually the City of Melbourne for neglecting our market for so many years, or management for failing to manage us properly, or even our Trader Representatives for not doing enough. None of those are the real answer.
The confusion is evident globally. In the US similarly favourable economic conditions exist and yet according to the Guardian, retail stocks for stalwarts like Macy's, Nordstrom and Gap have all fallen sharply this year with reports of the worst comparable sales results since the Great Recession. Tiffany's has just reported its biggest drop in quarterly sales since the GFC indicating that even the top end is not immune. So the conditions are great for shopping but consumers are not shopping. In the UK analysts are reporting a 10% decline in shopper visits to strip shops and shopping centres over the past year.
A consumer psychologist at Golden State University, Kit Yarrow, recently commented - “We’ve had to start looking at the consumer in a completely different way." “We can’t evaluate their confidence and willingness to spend in the ways we used to,” says Yarrow. “Consumers just don’t react the way they did even five years ago. Technology has taken over and they feel more empowered.” According to Yarrow, "It’s taking retailers forever to realise that when people go shopping they want to see new things all the time. This is what technology has done to our brains. We want a lot more excitement and product turnover in our lives. If we don’t see new product, we won’t go there any more."
Analysts generally are talking about the shock of the GFC creating a new consumer who says - "If I don’t get it how I want, when I want it, for the price I want it, I won’t have it at all." That quote will probably resonate with a lot of traders, certainly those in the more discretionary spending categories.
So, getting back to who is to blame for the current retail recession? Clearly it is the consumer, but unfortunately there is not much point in pursuing that blame. What is the old saying? - "It is unwise to bite the hand that feeds you." If blame is not going to help us then we need to find other ways of addressing retail doldrums and maybe the answer lies in Yarrow's contention that we need to constantly develop more excitement and product turnover through new products. Come to think of it, isn't that exactly what Zara and H&M did when they opened up their own factories producing new fashion designs on an 8 week turnaround? So much to think about.