PERSPECTIVES

From The Co-Founders

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Tips, Tactics & Strategic Insights and Commentary
from The ROI Co-Founders, Pat Johnson and Dick Outcalt
Outcalt & Johnson: Retail Strategists LLC; Retail Turnaround Experts

Call us contrarian, but...

Maybe you noticed this (see "Retailers Lay Out a Downbeat Outlook"*) but the big national retail chains, despite better-than-expected quarterly earnings this week, still are looking at a year of low to no growth, citing reduced spending by lower income groups, the loss of covid relief money, the effects of inflation, etcetera.

  • "This week, retail executives presented investors and analysts with downbeat outlooks for the first quarter and the year ahead, forecasting that sales growth, if any, will be much smaller than in years past."*
     
  • "Ross Stores expects sales to be flat for its fiscal year; Kohl's expect its net sales to decline 2 to 4 percent; Macy's said its comparable sales would be down 2 to 4 percent; Best Buy expects same-store sales to fall 3 to 6 percent."

But, here is the key observation, and an important reminder:

  • "To be sure, while there are worries about the outlook, the data so far don’t necessarily suggest that the economy is in or hurtling toward a downturn."  

How to reconcile this doom-and-gloom from the big national retailers with our still-strong economy, which is 70% driven by consumer spending? 
 

Here's how: While consumers are presently adjusting their spending because of inflation, there is a long-term – and seemingly enduring – change that in our contrarian view has yet to be fully recognized by some of the pundits. (Our feelings are not hurt.)

  • Thanks to the pandemic, many shoppers "discovered" independent retail operations. 
     
  • And, those shoppers liked what they discovered, and have continued to prefer those stores. 

 

Shoppers appreciate the unique selections, focus on quality, customer service, etcetera of these local or regional operations.

  • Moreover, in 2020, those independent retailers quickly shed their "technology laggard" practices, and embraced and deployed shopper-friendly services, from BOPIS to e-commerce, curbside pickup, etc.
     
  • Plus, of course, social media is a natural for most retailers, who after all, are "people people." 

All of which may well explain why consumer spending has maintained its strength, much to the puzzlement of the Big Guys and those who focus only on the Big Guys. 

Our contrarian view: this year will be surprisingly strong for independent retailers generally. Now, what do you think?

----
* Retailers Lay Out a Downbeat Outlook as Inflation Squeezes Low-Income Shoppers, Jordyn Holman, New York Times, Saturday, March 4, 2023.

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