When customer traffic slows, almost everyone suffers. Certainly restaurants (Panera Bread, Starbucks) aren’t retail destinations. They thrive on others’ traffic. A mall-based restaurant can’t pull more traffic into the mall. The restaurant can run in-store promotions to increase share of the remaining mall customers. It’s hard to avoid price promotions (The granddaddy of them all: Taco Bell’s dollar menu lifted that company from the depths). Restaurants generally pay the highest price per square foot in malls. They need to examine renegotiating their leases if they believe the slowdown isn’t going to be brief.

Here comes the real test for retail merchants. Gas prices are up 30% or more and likely to rise higher. What impact does that have on your customer traffic…your merchandise mix… your employees? Retailers usually don’t have the business intelligence to know their business well enough to answer these. If you have traffic counters, do you know the average business per visitor before and after the gas price increase? Do you know your conversion rate? Both metrics are probably up with higher gas prices. If your absolute number of visitors is down, have you lost any of your best customers or are they coming less frequently? If so, it is time for some targeted promotions? What are your customers buying? Are your product stars the same as when gas prices were low? Probably not. You need to reevaluate your lead products and your in-store display strategies based on which categories are the biggest contributors in the era of high price gas. How about your employees? Some are spending more than 10% of the take home… Read more »

It sure is easy to blame something else when the numbers are disappointing. If it’s not gas prices then its the weather (too hot, too cold, too rainy, etc), or Easter came in the wrong quarter. Giant Eagle has been offering a 20-cent per gallon discount for each $50 purchase until September 6. So basically a $750 purchase gets you a free tank of gas. They have been aggressively promoting the sale of retailer gift cards (Home Depot, Sears, etc) in their stores that count towards the gas discount. Giant Eagle has made high gas prices their friend instead of a lightning rod to blame problems on. At the same time they are helping other retailers by selling their gift cards. High fuel prices threw Giant Eagle some lemons and they made lemonade out of it. They have quietly been increasing their market share as gas prices have risen. What if fuel prices never come down and go to $4 a gallon? Or worse $7 or so like in Europe? Crying and pointing fingers are… Read more »

Thank you David Livingston and others who cut through the fog of excuses that so many mediocre retailers use when they have disappointing quarters. Yes, gas prices are $3 per gallon. They were that price last September after Katrina, and yet we all survived. This year, gas prices must become the de facto excuse, because the National Hurricane Center has had to revise its hurricane ferocity and frequency forecasts downward. There are still millions of Americans who stop in at Starbucks every day–maybe they just get regular coffee instead of a latte. Whole Foods in the NYC region is wisely advertising the value of its 365 line. Crate & Barrel is now marketing its lower-priced CB2 concept via national catalog mailings. The key is to remain upbeat, and not let the general buzz get you down. Defeat is self-inflicted in rough times or easy times. Ignore the media and focus on your customers and what they continue to need. As the intro pointed out, advertise! This is not to say that everything is rosy. The… Read more »

You know who is real happy about high gas prices? The weather. For years when retailers didn’t achieve their targeted sales they blamed the weather. The weather rarely got credited for when a retailer hit their sales target, but they sure got blamed a lot when the retailer didn’t. So now the weather gets a breather and high gas prices are to blame. The fact is the whole economy is in the doldrums moving sideways. There’s really no good news or really no bad news. I would agree that it is important for retailers to remain highly visible to their customers. Too often when sales soften retailers pull back on the very things that have made them successful. Instead of cutting back they need to reach out to their best customers and give them an incentive to come back into the store. Just as important is to maximize the opportunities. We’re seeing that as result of the weather, whoops I mean high gas prices, customers are making less shopping trips than in the past. Retailers… Read more »

I thought Starbucks indicated that the reason for their shortfall was the increasing demand for cold, blended drinks that take a little over 4 minutes to concoct versus the two and one half minutes necessary for a hot coffee concoction. Apparently, they did not anticipate this shift and failed to staff up to meet the demand that resulted in long lines and walk offs. If gas is involved here I expect it came from the Taco Bell next door!

Isn’t it interesting that upscale retailers like Nordstrom and Neiman Marcus reported robust same-store sales increases in July while other so-called upscale retailers blame their lackluster performance on gas prices. While I agree with other comments here, I believe the definition of upscale stores and affluent consumers has changed. In recent years more middle-income consumers have become disenchanted with the quality of the merchandise and the poor shopping experience in some stores. They have instead, decided to shop in upscale stores because of the quality of the merchandise and a better shopping experience. When the economy begins to slow, gas prices rise and other economic factors touch their lives they pull back and stop shopping in upscale stores. The ups and downs of our industry are nearly always based on several factors.

This is a poor statistic. We had $3 per gallon gas 6 months ago and retailers didn’t report poor sales then. There are so many factors, including which retailers we measure, which segments we measure, and how we compare these, that this statistic is not a good comparison. Instead, we need to look at how retail sales did compared to gas sales, or durable goods sales, and then compare these quarter on quarter, month on month and quarter vs. year ago. Without this, these numbers are very misleading and do not paint an accurate picture.

I suppose it depends on what side of the fence you sit on in the first place – optimism or pessimism. Last year there was a discussion on Christmas prior to the holiday. The comments were mixed. Just days ago, there was the same discussion again (in August no less!) and the comments were exactly the same – mixed. Today, we see a study, nothing more. The results or comments are based on the retailers surveyed – not all. I don’t think that any real conclusions can be drawn from them. Certainly, it may be possible to draw conclusions to support a particular point of view. Nevertheless, that doesn’t make them so. Just a couple weeks ago, there were dire predictions that gas would go well over $4 due to the pipeline in Alaska. The predictions were wildly speculative and filled with doom. Since then fuel has declined, slowly but steadily. In fact, even part of the pipeline has been re-opened when the prediction was at the time that it would be closed for months… Read more »

“To be sure, the nascent pullback isn’t affecting all retailers equally..” WSJ 08/21/06 P.A6

…Which is to say, contrary to the (unsubstantiated) claim of “growing evidence,” Williams Sonoma’s failure to sell enough $800 espresso machines is probably due to factors other than it costing $2.22 (vs. $2.08 two years ago) to drive to the store.

It’s axiomatic that if people (have to) spend more money on something essential, they will have less to spend elsewhere, but the most likely areas of cutback are pleasure driving and purchases of low mileage vehicles. Hello roadster; goodbye Yukon (and good riddance!).