Another Aggressive Holiday Season
It’s pretty clear that this holiday will be brutal for some retailers and great for consumers. Merchants are going into this holiday season much better prepared than in 2008, when most assortments and marketing had already been planned and placed when the Lehman Brothers bankruptcy on September 15, 2008 crippled the banking system and the economy seized up in response.
What are they doing? From what I’ve seen, I’d characterize the changes in three categories:
1) Leaner inventories – The bulking up that normally precedes December appears to be far more muted. Fashion items are coming in lighter, with companies ready to fall back on basics in the last weeks before Christmas if necessary. 10/25 shipments are where most Black Friday goods are shipped, so we’ll really see what inventories are like in another week or so.
2) Earlier promotions – Last weekend looked a lot like a December weekend in terms of promotions and sales. It looks like everyone is on the same page and ramping up the noise level early to tap into holiday budgets even farther in advance.
3) Lower risk tolerance – This is more subtle, and shows up in many places. From what I’ve seen, it looks like trusted brands, proven categories, and quantifiable marketing are all in vogue. Expenditures need immediate return these days, since its almost impossible to take on debt to finance long term initiatives. There is a little risk-taking at the margin (just enough to add a splashy item or two to advertising), but almost everyone appears to be hunkering down with their safest bets and preserving cash.
As we go into a second weak holiday, it’s likely there are a lot of companies that have been slowly burning through cash that may be in dire straits come January. With the debt markets essentially closed to small and mid-size businesses, there may not be enough lifelines to keep everyone afloat through 2010.
In an ideal world consumer confidence comes back enough to keep the worthy players going, the worst locations get shut down and converted to housing (infill is good – more density around the remaining locations and less rural land turned into subdivisions), and the debt market finally loosens enough to let CFOs do their jobs.