The Treasury is broke. We took in about $2.5 trillion in 2004 and the outlays were way beyond that. Interest on the debt is approaching a trillion with no foreseeable way to repay it. Given the war in Iraq, our finances were precarious at best. Now comes Katrina and Rita and the need to open up the Treasury to fix things at home and whallah! It’s empty. Can’t be done. Ask the good folk in Florida who’re still waiting on Fed funds to rebuild their hurricane onslaughts. Hurricanes K&R have forced people to step back, look at the politicians in the headlights and ask “…where’s the money when we need it?” ANSWER: Same place the Social Security money went–away, spent, squandered. They could finance the unanticipated half-trillion it’s going to take to fix up the Gulf Coast by floating bonds for foreign investors to cover, but I don’t think so. They could print a half trillion to cover the clean-up/fix-up costs, but then the dollar goes south and I don’t think so, either. Given the… Read more »

While I often find much to agree with Michael Banks Ph.D., I would take issue with one point and refer him to Dwight Eisenhower when it comes to discussing the economic costs of the military and war.

“Every gun that is made, every warship launched, every rocket fired, signifies in the final sense a theft from those who hunger and are not fed, those who are cold and are not clothed.”

Consumer retrenchment is a good thing. Long-term, it denotes a more stable economy, less consumer debt, and more investment dollars to fuel real economic growth rather than transitory, ephemeral bursts. However, barring another interest rate hike by the Fed, the strong housing refinance market will provide sufficient dollars to fuel a healthy Christmas retail season this year. With all due respect, I must take issue with Mark Lilien’s comments, and his incorrect premise that we “continue to lose the war in Iraq” heads the list of his illogical jumping-off points. Second only to that is the false assertion that, “The best thing for businesses and consumers in any country is peace.” History proves otherwise, but nobody wants war. It’s just a fact that wartime has promoted business in the U.S. rather than hindering it. A third uninformed comment is that “ANY use of our resources is more constructive than war spending.” So, exactly how have the billions we’ve spent and lent on foreign aid helped us? Further, how can you ignore the fact that recent… Read more »

Yes, there is reason to be concerned. Not because of the “shock” noted in August. Very definite and apparently sustaining economic variables indicate that disposable income is going to be under pressure.

So what does a retailer do about it?

1. Tighten open-to-buy by planning and budgeting at the upper end of historical turn performance.

2. Rigorously maintain volume price points. Push back aggressively against suppliers on pass-through that would impact the retail price.

3. Plan for and increase promotional activity around volume drivers and market basket core components.

4. Review merchandise assortments for perceived value. Examine price point differences within an assortment and scrutinize the real consumer benefit associated with price differences.

5. Scale back on color-wheels. Tertiary colors bought for presentation standards do not sell through. Particular in tough times.

I’m sure there are more. But these are easily instituted.

Every year, I look at the rosy predictions by NRF and other organizations and laugh. Seems out of touch with the reality of the marketplace – wishful thinking, I’d say.

Well, considering the events and natural disasters of late, I wonder if the American public is just going to want to reward themselves this Holiday Season, damn it!

They may just want to go ahead and buy that new appliance, dress or vacation, putting the purchase on the old credit card and spend, spend, spend. Let’s worry about tomorrow, tomorrow. If we wait, it may be too late. The kids will be grown up; the stores out of the stuff we want; we may attack another country; or another hurricane may blow us off the face of the earth.

When Americans are frustrated lately, they go out and shop. Weirdest thing.

The retail Christmas season is about to begin and consumers have valid worries about fuel prices (both gas and heating oil). Since oil prices have such a huge impact on so many other consumer products’ pricing, it’s clear that consumer budgets will be pinched as we enter the key retail buying season. Together with recent flat numbers in new housing and the associated burst of the real estate bubble, consumers will surely react with caution in their holiday buying. There has been a trend in the past several years to postpone holiday purchases until the last minute possible, and I’d expect this to continue. Also, expect the continued polarization of high and low end – if both do well, it could really squeeze mid-price retail.

The American Bankers Association reported today that late payments on credit cards hit a record high in the second quarter. Higher fuel costs are being cited as a prime contributor. The story gets a little scarier in context when you consider that the minimum consumers will have to pay on cards will be going up soon in accordance with Bulletin 2003-1. Look for new record highs on late payments to be set in quarters to come. Proponents of raising the minimum payment on credit cards said it would force consumers to reduce debt. Of course, it could just lead to fewer people being able to pay even the bare minimum. Add to that new regulations concerning bankruptcies and the exponentially higher heating oil charges that will be hitting home soon and well, it’s not good. Interest rate prospects are also not very encouraging as we continue to spend China, Saudi Arabia, Japan, England and others’ money financing the war in Iraq and the hurricane recovery efforts at home without any apparent plan for coping with… Read more »

Ah, more contradictions and demands that we should all have our cake whilst eating it. We want confidence and spending to be high but we want borrowing to be low. We do not want to pay banks exorbitant fees. We want low prices so that we can spend more and we don’t want people to stop equating spending with saving. We do not want to stop driving or flying but we do not want to stop importing. What can retailers do? Not a lot other than cross their fingers and try to weather the storm. Cutting prices and persuading people that spending equates to saving is pretty darn immoral, as is encouraging them to buy now and pay later. This is no time to relax, but there is no point hitting the panic button either. How about just trying to play fair? I’ve just been reading about increasing growth and confidence in online sales; perhaps improving this type of offer could be a beneficial and profitable focus. As for lobbying, scrub the “all’s fair in… Read more »

Call me a contrarian, but despite rising oil prices, I see the economy as one that has withstood hit after hit and still continues to produce record tax revenues, (in spite of the so-called “tax cuts for the rich”), steady growth in GDP and phenomenal growth in housing starts and re-sales. In addition, the rebuilding of the Gulf Coast will likely be a boon to a number of industries, retailing included. It is our nature as retailers to be cautious and preemptive in case consumer sentiment actually translates in consumer behavior. It rarely does. In fact, consumer confidence is just one factor in actual spending behavior, and clearly not the most significant variable. I also find it curious that at time when the economy is supposedly poised to take a dive, Wal-Mart, the world’s number one retailer, is working towards up scaling their product lines to appeal to more affluent customers. Given Wal-Mart’s track record of success, I would pay more attention to their strategic posture as a harbinger of future spending behavior than an… Read more »

Well, of course there’s reason for concern! Duh! I just about fell over a day or two ago when a respected organization that should know better predicted an upswing in Christmas spending this year. Gasoline is off the charts. Heating bills are off the charts, and we haven’t even begun heating season. Big box stores have already sounded the alarm. I said all this here a few weeks ago. Batten down the hatches, boys. It’s not going to be a good Christmas, especially for the lower-end stores, including Wal-Mart.

There are always legitimate reasons for concern about the economy, even in the brightest of times. At any given time, parts of the economy are on their way up and other parts are on their way down. That’s the nature of modern capitalism. The current situation seems starker specifically due to increases in fuel prices. Consumers are cutting back on car trips, including those to the mall. And, when they get their first fuel bill of the winter, the problem will be amplified.

Retailers will certainly need to bolster their online presence, as this holiday season will see a significant increase over last in terms of Internet shopping. Offering energy-saving products will show the retailer understands the consumer’s pain. Cross merchandising with gas stations could also address the fuel price situation.

As for the final question, the best single thing the government could do is win the war in Iraq (killing Bin Laden, wouldn’t be bad either). Nothing jumpstarts the economy like winning a war.

I don’t believe this is going to rebound soon. I truly believe that heating fuel prices are going to send consumers into another round of shock. And hitting, as it will, just as Christmas spending begins, I think retailers are right to worry.

I believe selling value is the way to go. I fear that more retailers will choose to sell price, but that’s easier, isn’t it? This affects all income levels. Obviously, it hurts less at the higher levels, but heating costs are expected to be 70% higher than last year. Bigger houses are going to experience a concurrently bigger hit. So, at every level of retail, not just discount, I think retailers should focus on providing a good value for the price.

As long as we continue to lose the war in Iraq, consumer confidence will be depressed. The war creates the need for higher interest rates, greater taxes and deficits, ties up productive labor, and undermines faith in the Federal Government’s abilities. The best thing for businesses and consumers in any country is peace. ANY use of our resources (saving money, social programs, energy research, tax cuts, housing, space exploration, entertainment, education) is more constructive than war spending. ANY war spending is wasted if there is no reasonable plan for winning the peace. Iraq is its own version of Vietnam, and the economy suffered for years due to the Vietnam waste. The short-term reason for low consumer confidence may look like energy, but the roots of the problem are much deeper and wider.

Shifts in confidence can adjust very quickly. Usually, the stock market performs far better in the last quarter. Gasoline prices will be jawboned down, and retailers will sense the need to give extra savings, and NEW merchandise. A winning combination for a bright Christmas,,,unless terrorists attack the US.

But, Greenspan may bring a halt to 1/4% fund use fees that could spark a consumer thrust in spending. Retailers have to be prepared for the upside, or lose considerable gross sales and margin. Hmmmmmmmmmm