Retailing’s Little Secret: People Are Spending Less
December 8, 2008 by Douglas A. McIntyreThere are two components to retail sales. The first is the total number of transactions that a business makes. The other is the yield-per-sale. So far this holiday season, total sales have not looked as bad as feared. They are off 3% or 4%, depending on which research service is reporting numbers. E-commerce sales are supposed to be flat.
The numbers are not uniform. Apparel spending is way down. Video game purchases are up.
The big trouble retailers have is that they work on tiny margins. Yield-per-sale is critical. Big discounting usually means big losses.
According to The New York Times, research from Chase "which surveys 25 of the largest 150 retailers on its Internet payment processing network, showed that the average shopper spent $7.19 less per transaction on Cyber Monday this year over last — reflecting deeper discounts than usual, thriftier shoppers or both."
Wall St. had started to express some optimism about retailers. Maybe this holiday would not be as bad as forecast. There has even been talk that "pent up demand" will lead to reasonable sales in December. It does not matter much if most purchases represent a loss.
Douglas A. McIntyre
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