One step up...
September 2, 2002,
I hate to say this, but 2003 is starting to look a whole lot like that year we'd all like to forget — 2001. Not in terms of recession, but in terms of a strong retail emphasis on opening price point merchandise.
Certainly, the effort to sharpen up opening-price-point offerings hasn't slackened. There's JCPenney's "the Bigger Towel" going out at a $3.99 price for a 30" x 54". There are Target Stores' infamous shootouts — an in-person auction that pits competitors against one another across a conference table. There's Springs' coming introduction of printed quilt sets at $39.99 all sizes. Even Ralph Lauren Home has nudged up the size on its core $12.99 Lauren program towel for deliveries that begin shipping later this year.
But one has to wonder if the industry won't be forced back next year into spending the sort of time they did last year on opening price points.
Consider last week's bombshell announcement from Merrill Lynch that it had cut its ratings on eight retail companies because the post-recessionary nesting phenomenon has likely passed its peak. "Sales expectations may be too optimistic, and the risk of sales disappointing is high," Merrill said in a research note.
And remember, this report was published after Wal-Mart, Target and Federated Department Stores had already lowered their sales guidance for the second half of the year.
The report is none too cheery — stippled with remarks about shifting to a defensive posture on retail stocks, predictions of an underlying slowdown in discretionary consumer spending, and, most ominously, Merrill's belief that "retail stocks have entered a new phase that has no historical parallel."
Even more telling is Merrill Lynch's opinion of which retailers have the best chance of hitting their earnings marks: Dollar General, Family Dollar, 99 Cents Only, Wal-Mart, JCPenney and Kohl's. Notice that only two out of those six squarely target a moderate price-point shopper. The others are all extremely sensitive to price point.
Expect Wal-Mart to lead the way into 2003 because, as weathervanes go, its decisions about how to appeal to the consumer are usually fairly accurate. Wal-Mart was one of the first retailers in early 2001 to state that it saw consumers focused on opening price points — and that was in March, just as the recession was technically getting under way and five months before anyone officially acknowledged the recession.
If opening price points are once again to take priority, there are a few more unpleasantries we can expect ahead, namely more auctions, more de-specing and more promotional selling.
So here's to the new year — let's hope it's not the same as the old year.