Dramatic decline in retail traffic
Looks like shoppers avoid the mall and shop online.
We've seen a major conundrum this retail season and it is on the minds of every retailer I know: the dramatic -- and that's not too strong a word -- decline in traffic, in people coming to the stores.
Think about it. Almost every retailer that missed expectations complained about traffic, particularly the apparel retailers. When you studied that horrendous miss from
Abercrombie (ANF), and everyone should study it so you never get caught in a teen apparel mess again, you come back to one word, "traffic." They simply couldn't get people into the stores. Same with all of the other cascading teen apparel stores that had been such a hotbed of hedge fund activity.But Macy's (M) didn't get the traffic it wanted, nor did Nordstrom's (JWN). It's been the common denominator for all but home goods stores, close-out stores and highest fashion apparel, as opposed to say the V.F. Corp. (VF) materials sold at department stores and the Nike (NKE) clothing sold at Dick's (DKS) (I am saying Nike because Dick's specifically said there was no problem with Under Armour (UA) clothes.)
Even Gap (GPS), which reported a stellar quarter last night (truly terrific with a guide up and dividend boost and one that we like for Action Alerts PLUS) talked about a decline in traffic for its stores.
So let me trace out a theory. I think this might be the quarter, and the year, where the stay-at-home shopper, using all of these cool websites, trumps the person who gets in his or her car and goes to the shopping center or the shopping mall (remember from the REITs they are two different things, but for the purposes of this thesis they are the same.) The hassle-free Web experience has now trumped the hassle-plenty mall existence, which, at a time where disposable income isn't increasing, could be the key to the declining traffic. Ask yourself, have you bought goods at the website of the company you want the product of where you might have gone to the mall to get it otherwise? You bet you have.
Now, here's where the mall and shopping center come in. When you go to the mall you walk by a lot of stores. You are in traffic. But when you don't go to the mall you are not in traffic. I think when people are strapped, the mall is a distraction, if not the enemy. You are a kid in a candy store and you can't afford a lot of candy. You can afford what YOU want, but not what they want to sell you. So why go? Why have the hassle?
That's where the traffic went.
Now, rich people can still shop. That's Michael Kors (KORS). So can homeowners whose homes are going up in value and can be fixed up now without throwing good money after bad. You have to go to Home Depot (HD) or Lowe's (LOW) if you want to get the power tools and the kitchen and bath. By the way, integral to my thesis will be the numbers Restoration Hardware (RH) reports in three weeks because it sells the most expensive housewares. These hard-goods merchants are places where you still need the showroom and you might need the help. Plus, contractors go to Home Depot and Lowe's, not Target (TGT) and Wal-Mart (WMT), two more challenged retailers.
But further buttressing this thesis are the quarters of TJX (TJX) earlier this week and Ross Stores (ROST) last night. They were both bang-up. Throughout the retail food chain there is way too much apparel inventory. That's how TJ and Ross can shine. I bet their next quarters are even better, as this spring and summer apparel has to be cleared out at all costs.
That means, again, not enough traffic. It is, by the way, bad news for V.F. Corp., which is a premier apparel company and you could see that stock roll over big-time in Thursday's up tape.
Yes, the websites, the social and the mobile, I think they are all combining to crush traffic even as the direct-to-consumer numbers have been pretty fabulous all across the board.
That means, to me, that the traffic stayed home and shopped. So it didn't matter what you did to pull the people strolling in the mall to the store. They weren't there anyway.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and is long GPS.
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true enough, people use the internet more. i noticed several years ago that stores dropped their inventory. so for any particular product (toasters lets say), stores only have one or two to choose from. so online shopping is a natural when in the market for toasters or anything else now.
also, as a test, i looked for a unique small battery we needed. it was $12 at walmart. i went online and saw the same battery pack for $1.85. guess where i bought the battery? DUH!
stores have limited inventory, and over charge.
as far as traffic goes, don't forget people have reduced money in their pockets now too.
A lot of people physically go the mall, but never leave the anchor store they go into. My wife does this all the time - she'll park in the mall parking lot and go into Bed, Bath and Beyond or Macy's or Belk, and then come back out, never venturing into the actual mall or going to any other stores.
I've always wondered how these small stores in the mall even stay in business, especially since their rents are sky-high. The foot traffic in these places is probably pretty high, but what's the foot traffic of people who are actually viable customers?
We've done almost all of our Christmas shopping online the last few years, and I won't step foot into any major retail store between Thanksgiving and Christmas. I get my fill of the retail holiday spirit and decorations between Halloween and Thanksgiving.
I think you or the masses that are moving towards relying on internet or on-line purchasing, will have a rude awakening in the future; And regret the day that many "brick and mortar" locations disappear.
Once there is a majority change over, service will deteriorate, demands from suppliers will increase such as shipping cost, accommodations for deliveries, theft, breakage, applied taxes, etc...
And the worst, there will be no accountability; You will be talking to a phone conversant system or a computer...Or probably be screaming over your phone or device, with empty threats.
Steve, don't think you are lying, but seems there is more to the story of the battery, that was 90% cheaper on-line...Particularly was it Apples and apples or was it Apples and Oranges.
Stores and even businesses, have been forced into carrying less inventory over the last 20 years or so.
The Recession in 2007 and beyond has made it more evident as a business model.
Lesser demand or lower demand for a product has weighed very hard on providers to carry more then just enough to provide a weekly or monthly supply...Some are down to days.
This has caused manufactures or finishers of products to rethink their whole, supply and demand chain.
Now only to gear up for a few weeks and then gear back down until new orders arrive for their products...This has affected the jobs picture, in a horrendous way...
Keeping only bare minimum personal on hand to perform production.
And caused such businesses like Manpower and Kelly services to flourish...Or other types of Temp Agencies.
Yes sales taxes, when not if; This has become too much of a burden on States(already has)..
Look for them to all move swiftly to collect their "fair share" of revenue to replenish their coffers.
Especially and eventually losing, property taxes where 'brick and mortars" start closing too many doors.
States that have "no sale tax" will probably change also, having to derive revenue from some place.
It will be a game changer.
Even the possibility of some sort of Federal charges, could apply for return to States as revenue from their location...Such as they do with fuel and highway usage now.
The by-passing of taxation cannot go on forever...
And on-line sellers are well aware of the "underground economy" they have managed to keep going for the time being....So is everyone else.
"JACKSON HOLE, Wyoming (Reuters) - The Federal Reserve should concentrate its unconventional monetary stimulus on mortgage asset purchases, according to a new study released on Friday, ditching Treasury bond buys which the authors say have not had much of an effect."
Absolutely NOT. Apparently, our biggest problem today is who we deem qualified to speak at these sessions. When the housing market crashed in 2009, it wiped out two critical bastions- the security value of hard assets and the viability of credit instruments relying on security. Some people might say- let the Fed buy those unstable mortgages but that would not be wise for a recovering nation to allow a non-entity to control the integrity of our assets as collateral, the viability of our credit instruments and the rate we would be repaying QE all in one neatly corrupt and compromising package. Let's go down a better road... service the credit you've bought, Mr. Fed and let's call the bonds you bought-- junk, because they are.
As a Retailer I have beieved for some time now that most stores will not survive for another 15 years. You will only have very high specialty stores, and the Big Box stores that survive all the rest that make it will be online stores.
Stores can't afford the employees, the Rent, The Insurance, The Utilities and other expenses and still compete on prices.
You guys have got me on the ground rolling like a turtle or a pill bug.
Regal and ABS...Let's put this shidt to rest; I might be able to buy and sell both of you...??
I've gotten weary of reading the comparisons...
All we have to do is sell one of our 40 acre plots on the major State Hi-way near us, to a developer.
It's a desirable area.
Maybe sell an oil well or some land we own in Oklahoma, some family involvement may be a problem.?
We don't need the money, so we don't care...Kids will probably just squander it anyway.
May leave it all to PETA or Greenpeace, if they piss us off.
Reminiscing, "yeah that's what we do" ; We are old and it's a good way to finish out your "golden years"....More fun then bitching about everything all day...EXCEPT the bullshidt on TV, we yell at that...
GET OFF MY LAWN, no make that OUR LAND.
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