Tuesday, August 21, 2012 | Edited by Daniel Moores
||As School Bells Ring, Retailers Start Listening for Sleigh Bells
U.S. retailers expect another solid showing this holiday season, as summertime surveys and shipments show that companies are placing big orders even as some remain cautious about the economy.
A report from the National Retail Federation showed that increases are expected in imports during August, September and October, critical months when chains get their merchandise from overseas in time to stock their holiday shelves.
Meanwhile, manufacturers and importers surveyed by Capital Business Credit showed "cautious optimism" for the 2012 holiday season, said Andrew Tananbaum, executive chairman of CBC, a non-bank lender for the retail sector.
Such upbeat takes suggest that retailers expect the upcoming winter holiday season could help them overcome what has been a somewhat muted back-to-school season. Retailers such as Walmart and Gap Inc. have seen strong sales of apparel, but others including Aeropostale Inc. have seen a soft start.
Some school-related buying has moved later into the year so the books are not yet closed on back-to-school.
"A lot of customers will wait until school starts, and they don't buy things until they absolutely have to," said Wal-Mart Stores Inc. Chief Financial Officer Charles Holley.
Any dip in the economy can quickly take a toll on sales. In 2008, with the United States in a recession and rocked by news such as the bankruptcy of Lehman Brothers, holiday sales fell 4.4 percent. They did not rise again until 2010.
The November-December holiday season makes up the biggest chunk of U.S. sales all year, followed by back-to-school, and recent projections suggest retailers are stocking up.
"Retailers don't import merchandise unless they believe they can sell it, so import numbers are considered a good leading indicator of future sales," said J. Craig Shearman, NRF's vice president for government affairs public relations.
Year-over-year imports are forecast to rise 6.3 percent in August, 7.3 percent in September and 13.2 percent in October according to the NRF's Global Port Tracker, produced by consulting firm Hackett Associates and released on August 13.
In 2011, year-over-year imports tracked by the report fell 7 percent in August, 0.6 percent in September and 5 percent in October.
For all of 2012, import cargo volume at major U.S. retail container ports should rise 4.8 percent from 2011, according to the report. In 2011, such volume rose just 0.4 percent.
Last year, 27 percent of Capital Business Credit's clients -- importers who sell goods to major retailers such as Wal-Mart and J.C. Penney Co. felt that the 2011 holiday season would be better than the 2010 one, Tananbaum said. Now, 43 percent expect the 2012 season will outpace 2011.
Still, while 33 percent have seen holiday season orders perk up from 2011, 22 percent have seen such orders decrease.
Last year, U.S. holiday sales rose 4.1 percent, outpacing the NRF's October forecast of 2.8 percent but below the rebound of 5.2 percent seen in 2010.
This year, gas prices may be an added concern. The national average price was nearly $3.72 a gallon for regular on August 17, up from $3.58 a year ago, according to AAA data.
"Everyone is constantly worried about what's happening at the gas pumps," said Peter Whitsett, executive vice president of merchandising and marketing for Meijer, a private chain of nearly 200 stores and nearly 180 gas stations.
In states such as Michigan, where Meijer is based, the pop has been even more pronounced. The average price per gallon in Michigan is $3.95, up from $3.67 a year ago, and in spots across the country consumers are paying $4 a gallon or more.
Retailers Getting Ready
While the NRF will not issue its holiday forecast for several weeks, retailers are showing optimism, even though it can be hard to get a solid understanding of how consumers feel before the holiday season.
"Every Christmas is competitive and this will be no different," said Kohl's Corp. CFO Wes McDonald.
An extra two days between Thanksgiving and Christmas and Christmas falling on a Tuesday versus a Sunday in 2011 are expected to boost sales in the final stretch.
"Obviously, we have the additional time between Thanksgiving and Christmas, which will help the month of December," Macy's Inc. CFO Karen Hoguet told analysts on a conference call.
While the overall news in the economy is not all positive, shoppers are still feeling "better than they did in 2008 and 2009," said Jerry Storch, chief executive of Toys R Us.
His chain will carry more exclusive products as well as classics such as Lego and Ninja turtles as it tries to win shoppers from its discount and online rivals, and Storch said he expects this should be "a good toy year."
Still, with some shoppers hesitant to spend, especially with rising gas prices, retailers are planning ways to entice such shoppers and reduce their own holiday-related costs.
Walmart will bring back layaway for the holiday season, letting shoppers pay for items over time, and said that it feels good about its inventory levels heading in the holidays.
Target Corp., meanwhile, got its toy vendors to agree to send early holiday goods in the third quarter rather than in the second quarter, Executive Vice President of Merchandising Kathee Tesija told analysts on a call in mid-August.
She said the change should not jeopardize Target having items in stock "one bit."
(Source: Reuters, 08/19/12)
||Stores Bulk Up on Appliances
The housing market remains sluggish and many consumers still aren't splurging, but a growing number of retailers are trying to lure shoppers into stores with restaurant-grade stove tops and ruby-red washing machines.
Store chains are escalating their competition to sell appliances because many shoppers still prefer to buy the bulky products in person, making them somewhat immune from showrooming, the trend of consumers trying out merchandise in shops only to purchase it online.
Rivals also perceive opportunity in the struggles of Sears Holdings Corp., long the U.S. leader in appliances, which has closed more than 100 large stores this year.
Home Depot Inc. is expanding the space devoted to appliances in some of its stores to carry dishwashers and ovens from Whirlpool Corp.'s Whirlpool line and Electrolux, popular brands long carried by rivals Sears and Lowe's Cos.
Best Buy Co. is offering higher-end brands of stoves and refrigerators, such as Viking and Thermador, in more stores in hopes of offsetting slumping sales of TV sets and computers.
Wal-Mart Stores Inc. has been testing selling refrigerators and washing machines in 45 Texas stores for the last year as it looks for new ways to increase sales in its cavernous U.S. Supercenters.
The added competition could bode well for consumers if retailers resort to slashing prices to move merchandise. But it could also further commoditize appliance sales, similar to what occurred with flat-screen TVs, eroding the higher profit margins that helped attract retailers in the first place.
That could be especially troublesome for Sears, which suffered steep losses last year when it tried to undercut rivals' discounts on major appliances to preserve market share. Sears lost $3.1 billion last year.
Sears remains the largest major appliance seller in the U.S., but its share of all U.S. appliance purchases has dropped to 31% from 40% a decade ago.
"It's a very simple equation for why, despite the competitive nature of retailing, Sears has maintained its very strong lead in the appliance business," said Steve Haber, home appliances president at Sears. "We carry all 10 of the top 10 appliance brands and have the largest dedicated team of 8,500 service technicians to stand behind the purchase. We will continue to work hard to earn and keep these customers' trust."
Stocking up on $7,000 refrigerators and $1,200 washing machines might seem like a sucker's bet given the overall headwinds facing the appliance market, which actually sank 5.1% last year to $19.1 billion, according to The NPD Group, as the housing market woes and tightened consumer spending continued to affect big-ticket purchases. Goldman Sachs recently estimated that sales of large appliances will fall 1% this year.
But unlike prices for TVs and computers, which have plunged in recent years, appliance prices have remained steady and are beginning to rise, as manufacturers begin passing on higher raw-material costs. While retailers typically offer moderate discounts on appliances to drive traffic to their stores, the companies say they are still able to turn profits on the sales.
"Promotions are a large part of the appliance industry, but it is a great margin category that will continue to hold its margins," said Kevin Balon, vice president of Best Buy's home merchandising group.
Appliances were one of the few sales categories that increased for Best Buy last year, as it posted a $1.23 billion annual loss. So about 30 Best Buy stores in the country now house an expanded appliance area marketed under the name Pacific Sales, a higher-end appliance retailer Best Buy bought six years ago. It is planning similar expansions in more stores this year.
In a weak economy, most customers buy appliances when the ones they already own break down, so they need quick delivery, said Electrolux Chief Executive Keith McLoughlin. Only about 8% of major appliances were bought on the Web last year, compared with 18% of TVs and half of all tablets and e-readers, according to market researcher Traqline.
Sales of large appliances currently make up only 6% of Home Depot's revenue compared with 11% at Lowe's, according to Goldman Sachs. So in a bid to expand its share, Home Depot is planning to offer the enhanced appliance assortments in 100 of its approximately 2,000 U.S. stores as well as online.
To limit its capital spending, Home Depot won't stock all the appliances in its warehouses but get them through a special order arrangement with manufacturers, who will deliver the products to Home Depot's recently expanded network of distribution centers.
Home Depot figures it now carries about 70% of the appliance brands customers seek out, up from 40%, said Gordon Erickson, the company's senior vice president of merchandise services. But with shoppers' discretionary dollars still scarce, "We will have to earn those sales," he said.
(Source: The Wall Street Journal, 08/03/12)
||U.S. Beer and Wine-Making Growth Spikes
Americans have long enjoyed reaching for a cold one, and a growing number want to first make it themselves.
The Brewers Association recently reported that the number of breweries in the U.S. is at a 125-year high. There are now 2,126 breweries in the U.S., the most since 1887.
"There is nearly a new brewery opening for every day of the year," says Paul Gatza, director of the Brewers Association, a rate of growth that he says is faster than at any time since the end of Prohibition.
Along with making more beer, Americans have spent more on craft beers this year. Dollar sales at craft breweries were up 14 percent in the first half of 2012, and the volume of craft beer sold was up 12 percent. The breweries included in that tally don't include behemoths like Miller or Budweiser; it includes only breweries that are small, independent, and use "traditional" brewing methods -- that is, that meet certain ingredient standards.
However, "small" is a relative term: It includes breweries that make up to 6 million barrels, or 186 million gallons, per year. Thus, that includes tiny microbrewers but also well-known companies like Sierra Nevada and Samuel Adams. Altogether, craft breweries make up 97 percent of all U.S. breweries.
The growth trend extends to wine as well. As of 2010, there were 6,672 wineries in the U.S., up by nearly 2,000 from 2007 and way up from 579 in 1975, according to figures compiled by WineAmerica, a national winery association based in Washington, D.C. That's the most wineries ever in the U.S., according to Cary Greene, chief operating officer of WineAmerica.
Though DIY drinking may look like a broad trend, brewers and vintners aren't entirely driven by the same factors. While breweries flourish, Americans are actually drinking less beer than they used to -- around 8 million barrels less than in 2008, according to Gatza. Meanwhile, wine consumption has grown steadily since the early 1990s, from 1.74 gallons per person in 1993 to 2.54 gallons in 2010, according to the Wine Institute, a California-based advocacy group.
More wine-drinking is naturally helping to drive wine-making, says Greene. But he also points to the growth in the locavore movement and agritourism as key factors in winery growth.
"There was a model that was developed: come out to wine country, taste wine in the tasting room, bring back a piece of the vineyard to your house. That was also a pretty important factor of how it's developed to date," he says.
Meanwhile, brewery numbers may be growing because Americans' tastes are changing. Gatza compares it to other foods like coffee, bread, and cheese, where "artisanal" varieties have proliferated.
"Even a beer style like India pale ale, there are so many hop varieties out there that one person's IPA doesn't taste at all like another brewery's IPA," he says, adding that drinkers are increasingly interested in trying new kinds of beer.
This may be one reason why Americans are drinking less beer but more types, he says.
"Instead of drinking maybe three domestic lagers or light lagers, they're drinking maybe two craft beers instead," says Gatza.
He thinks that even during an economic downturn, people are willing to spend more than usual on their drinks -- sometimes significantly more so -- as they cut back on other areas.
"It looks like wine, like beer, is showing a lot of growth at the high end -- the wines that cost over $20 a bottle, the beers that cost more than $26 a case." While people may not go out to restaurants or vacation as they cut their budgets, he says, "people can treat themselves to that."
(Source: U.S. News & World Report, 08/10/12)
Daily Sales Tip: Using Powerful Words
You can be powerful with your vocabulary without sounding arrogant. Two of the most powerful words in the English language are "you" and "I." "You" is most effective when influencing, persuading, or selling to someone. The focus should be on the person we are speaking to. Most of our statements in business should be "you" based. "You're going to love this new copy machine. Imagine all the benefits to you and your company."
The word "I" is best used in a conflict situation. In conflicts, we often begin by accusing and attacking the other person. You were wrong. You made a mistake. You made me look bad. The other person, upon hearing this tirade of "You," begins to withdraw or become defensive. Either way, the communication has stopped. A more effective way to approach conflict is to use the word "I." "I feel that there was a mistake made. I was embarrassed and felt we could have been better prepared." Nothing in that statement is directly accusing, yet you are still getting your point across and chances are the other person won't feel defensive.
Other strong words are urge, recommend, and suggest. Pick your words carefully. Selecting the wrong one is sure death for a salesperson trying to convince a potential buyer about the merit of his or her product or services. Which of the following is the more confident statement and would close a sale?
"I hope your company would benefit from our services."
"I guess your company would benefit from our services."
"I believe your company would benefit from our services."
"I think your company would benefit from our services."
"I am confident your company would benefit from our services."
It's no contest. Statement five is the correct verbal choice of winners. The idea behind understanding which words send which messages is to make conscious decisions about the words we choose to use. Instead of saying things out of habit, be aware of what you say and create new, more effective habits when you speak. Aristotle said, "We are what we repeatedly do. Excellence is not an act, but a habit." Make sure your habits are good ones.
Source: Marjorie Brody, executive coach and member of the CPAE Speaker Hall of Fame