Despite the huge price cuts, retail sales ended up considerably lower this year than in the past. It implies that while retailers have cut their margins considerably, they still failed to see the volumes needed to stay afloat.
Boxing day sales have stretched to become boxing week sales, yet the volumes are still lower than expectations. The decline in gasoline prices have hit the retail trade in North America. The price per litre in Canada fell under 70 cents. This is a welcoming news for the consumers, but not a good omen for the retail trade.1 As the gasoline price declines, the retail trade volumes declines as well.
Even if the retailers are able to attract consumers by cutting prices drastically, would they not inadvertently induce forward buying. If that were to be true, then I foresee bigger troubles ahead for the retailers in February, March, and April of 2009.
The British press is already predicting demise of 15 large retailers.2 It appears that the price cuts are not sufficient to prevent major retailers from insolvency in the UK . If the weaklings in the retail sector are forced out of the market, leaving the strong ones standing, would this result in retail oligopolies and less competition, or would it imply that the retail supply will scale down to meet the real retail demand. The past decade of expansion in the retail industry resulted in many retailers going global. May be it is time to go local again!
While the European and North American markets are pictures of doom and gloom, the consumers in Australia are in a defiant mood. The Australian Retail Association is predicting higher post Christmas sales than the last year. The important question to ask is why Australian shoppers are buying when everyone else is saving? 3
1: Retail Sales Plummet --- Discounts Don't Revive Holiday Spending; High-End Walloped,
By Ann Zimmerman, Jennifer Saranow and Miguel Bustillo
26 December 2008, The Wall Street Journal
2: Analysts say 15 retailers face collapse within month
By Martin Hickman CONSUMER AFFAIRS CORRESPONDENT
26 December 2008
3:Retailers tip sales to better last year's
26 December 2008,The Australian