Maybe we need to rename it the retail bummer. Apocalypse just sounds so … well, final.
By Mike Giambattista
If you pay attention to retail, to retailers and to the press that covers retail (and we do) you will have certainly heard of the gloom and doom that awaits them all known as the retail apocalypse. It takes various forms and definitions, of course, but for the uninitiated, it generally centers around a few main themes:
- Amazonification – (we’re all doomed because Amazon is taking over the world)
- Increased customer “fickle-ness” – (we’re all doomed because millennials are just too demanding)
- The Middle Class Squeeze – (we’re all doomed because middle class disposable cash is low and dwindling)
- The Number of Large Retailers that are either shutting down or downsizing – (we’re all doomed because the anchors are all doomed)
- The Huge Amount of Retail Debt Outstanding – (we’re all doomed because retail sales can’t support the LBO debt they’ve taken on). We’ll come back to this last one.
If you read carefully through this list, the common theme is that, for one reason or another, retailers all seem to be doomed. Bloomberg noted that the phenomenon is now so widely accepted that it even has its own Wikipedia entry.
This past November, Forbes posted an article entitled, “Don’t forget about the Retail Apocalypse”, as if to remind us all that it really is very crappy out there. But even they had to temper their gloom with this statement:
“To be clear – this is the best holiday season in memory. Consumer confidence is strong, the stock market keeps hitting new highs and shoppers turned out in record setting droves beginning Thanksgiving through Cyber Monday. Records were broken, and broken again. There are a lot of reasons for good cheer.”
Yes, the amount of debt retailers have taken on over the years, through leveraged buyouts by private equity firms, is large – potentially even crippling. And the ratio of risky debt in many of those portfolios is enough make your hair stand on end.
“The debt coming due, along with America’s over-stored suburbs and the continued gains of online shopping, has all the makings of a disaster. The spillover will likely flow far and wide across the U.S. economy. There will be displaced low-income workers, shrinking local tax bases and investor losses on stocks, bonds and real estate. If today is considered a retail apocalypse, then what’s coming next could truly be scary.”
But this holiday season, though we are still in the midst of it, seems to be telling us a slightly different story.
According to the Los Angeles Times, “…Forecasts were optimistic coming into the annual shopping blitz, and we’re getting hints the cheer was justified: The Commerce Department reported that November retail sales were up a robust 0.8% from the previous month, blowing past analyst expectations. Online spending has been strong, with e-commerce sales up 14.7% from a year earlier in the early part of the holiday rush, according to data from Adobe Digital Insights.
These holiday-season indicators don’t just matter because they suggest it will be a holly-jolly fourth quarter. They matter because they add to evidence U.S. consumers are in good shape.”
Yes, this looks to be one of the best holiday seasons retailers have experienced since the Great Depression.
And remember last week’s U.S. news cycle? Republicans passed a giant corporate tax cut which the President just signed into law. Again, the LA Times,
“There is arguably no policy goal for which retailers have fought harder in recent years, and the changes are sure to provide a major boost to their balance sheets.”
Wait, that sounds uncomfortably optimistic.
Mike Giambattista is the Managing Editor at The Wise Marketer and is a Certified Loyalty Marketing Professional (CLMP).