Update (January 16, 2002):
Though known to be in extremely weak shape, retailing giant KMart may be the next large retailer to go under. Recent changes at the super discounter have been strange at best. Several KMarts in the Southern California area had begun selling new and used cars in an open-air market that used large parts of their existing parking areas. It is unknown if this had been planned as a partner exhancement or if this is a last ditch effort to stave off bankruptcy. After a 14% stock price decline this week, most analysts are expecting a bankruptcy announcement shortly.
In unrelated news, JCPenneys charge card holders were shocked to receive recent mailing about a significant increase in interest rates on their cards. Most had been at a 14.9% annual rate. The new rate is 21.0% and will be applied to the entire balance unless the cardholder destroys their card, no longer makes any charges to their account and notifies JCPenneys in writing that they have destroyed their cards and will make no more charges. Similar moves by the now defunct Montgomery Wards stores forewarned of that company's empending collapse.
Update (December 30, 2001)
In one of the slowest seasons in twenty (20) years, virtually all retail sectors reported huge slumps in sales. Hardest hit was the computer and computer accessory segments. Sales were down 20% or more in all parts of North America. This is a huge decrease in that this segment was growing at nearly 24% per year prior to August 2001. Most experts looking at these figures believe that the majority of purchases were people replacing older equipment, rather than hordes of Newbies making first-time computer purchases. This Newbie segment has driven computer sales increases for over a decade, but now a market saturation appears to have been met. The 13% of North American (US and Canada only) homes without computer access are likely to never have computer access - whether by computerphobia or for economic reasons. This saturation was predicted many years ago, but seemed unlikely during the dot.COM frenzy of 1998, 1999 and early 2000.
While waiting for exact figures to be distributed by leading retailers, JCPenneys, Mervins and Sears entered this Holiday season in particularly (and uncharacteristic) weakness. Due to the huge sales decreases seen, it seems likely that another retail collapse on the scale of the Montgomery Wards bankruptcy is likely for more major department-store type retailers.
Possibly related to the terrorist fears and reactions of many North Americans, online sales increased about 10% in a sudden surge during the two-week period before Christmas. Online increases were the single oustanding increase this season. Increases occurred at most of the many popular online retailers only, with online malls reporting no increases, some even report severe decreases (akin to brick-and-mortar retail malls). This new online specificity (retail specialists vs. retail generalists) follows and mirrors a brick-and-mortar trend that has been changing retail buying patterns since the early 90's.
It would appear that consumers no longer mind visiting many specialty stores to get an exact item at an exact price with specific delivery instructions as opposed to the patterns of the late 60's through the late 80's, where the Mall mentality demanded most retailers to carry broad product lines that appealed to virtually all consumers. Being a "one-stop shop" was the important thing. Pricing came second, and delivery wasn't even offered on most purchases. The new mentality is to find a specific item at a specific (usually lowest) price with delivery arranged at the time of purchase. The item is prepaid at the time of purchase, and the consumer is totally finished (except for getting a "Thank You" in their E.Mail from the recipient) when they leave the store or website. Wise retailers will take note of this trend. The only increases seen this year were by online retailers who were able to seamlessly achieve this new pattern.
Original story (November 3, 2001):
As with most post Thanksgiving weeks in recent decades, holiday shopping increased this year. It even increased by about the amount originally predicted (more or less 2%). What was unusual was that online shopping only increased by the same amount as overall shopping. Original estimates had placed the online increase at nearly 6%, but this failed to materialize as the increase merely mirrors the overall increase. In addition, there are subtle differences in what people bought. Holiday shopping traditionally is a mix of durable, needed gifts (appliances, durable winter clothes, TV's, VCR's, and similar) and highly frivolous gifts (jewelry, perfumes, holiday sweaters, and similar) that are usually only seen or bought during the holidays. This year is proving to be an exception.
High-end electronics are where the shift shows up most. Shoppers snapped up traditional electronics, but shied away from anything cutting edge or trendy. This is a variation on the sudden push towards durable and needed gifts. People are replacing broken items in electronics, but not spending on newer gaming systems, HDTV's, DVD players and recorders. A slight increase from the overall pattern was seen - electronics gifts increased by about 3%.
It is widely believed by a majority of marketing consultants that this slight increase, and the shift in gift purchases has to do with the September 11, 2001 terrorist attacks. People feel the need to replace older or broken things (new clothes, new TV's and similar) but are rejecting anything that suggests true change (new generation PDA's, DVD players and recorders, and similar). Computer systems took a direct hit this year for the first time since PC's became household staples - there growth rate was perfectly flat. People are apparently only replacing obsolete or broken computers.
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