The Grinch That Stole Christmas Sales

Do you remember that scene in the animated holiday classic How The Grinch Stole Christmas, where the poor little dog Max is alternating between being hilarious and acting as a poster child for PETA as he attempts to pull the over-laden sled up the steep slopes of snow covered mountains?

At one point Max teeters precariously on the edge of a cliff, and it looks as if he will plummet to his death in some cavernous winter wonderland. Perfect children's fare.

The Wall Street Journal is reporting that retailers weren't as lucky as Max. Holiday retail sales plunged 5.5% in November and fell an amazing 8% in November in what some experts are calling  the worst holiday shopping seasons on record.

Considering that early discounting was the response from most retailers, the impact to margins and P&L statements will be even more severe, as many goods were sold at break-even levels or lower. Even the purchase of gift cards was affected, which might curtail some of the post-holiday spending, terrible news for shops that count gift card sales at redemption, not at purchase. Heavy discounting prior to Dec. 25 also makes post-holiday sales less attractive, leading to the possibility of even more radical pricing strategies as merchants attempt to move sluggish inventory to generate cash flow and to support spring margins to buy.

Much hand-wringing by the industry is to be expected, as the retail community is somewhere near the Mendoza line in their performance this past year. While heaps of scorn for automakers and dealerships are evident, there's yet to be much public blame assigned to the retail supply chain, whose failure to anticipate a slowing consumer spending pattern as part of the overall economic slowdown is of epic proportions.

Of course, experts and retail management will quibble, their defense sure to include things like lead time needed for buys to be delivered for holiday marketing campaigns and how things weren't quite this terrible back when the purchasing and ad campaigns were implemented. That's letting them off the hook.

The ability to forecast consumer spending habits, and to make key determinations as to what the customer will want to buy and how much they will want to spend, is the crystal ball that separates successful retailers from the rest of the pack. In my many years in retail, the common explanations from management whenever sales failed to meet forecast or fell below l/y weather (it was bad, so no one could come out to shop, or it was good, so people were doing things other than shopping), the calendar (we had huge sales this weekend last year), and of course, the economy (no one has jobs to they can't afford our 27 SKUs of Dolby surround sound 5.1 DVD players with progressive scan). 

It's slightly amusing that these same merchants who've made millions thought the concept of false scarcity, with rabid crowds sleeping in the parking lot to be first in line to trample their neighbors in their quest for small quantities of discounted are now suffering the fate of actual abundance, as consumers aren't buying and stockpiles of unmoved goods hang as a profit-killing albatross around the necks of retail executives, who are doing the only thing they know - slashing prices and cutting heads, their eyes on the weekly and monthly numbers rather than on the horizon.