Taking the Retail Industry’s Temperature: Higher Sales, Increased Consumer Confidence

Paul Milner

As we have all heard or read by now, some of the recent media coverage on the state of retail has centered on the supposed overwhelming underperformance of the industry.

That narrative could not be further from retail’s true story.

Retail is a much healthier industry than the headlines would indicate. We aren’t saying that many of the players have come away completely unbruised, because they haven’t. As Sageberry Consulting’s Steve Dennis says, “regional malls — and their department store anchors – have been in decline for more than two decades.” Many industry experts agree that this is a result of massive overbuilding and speculation, as well as organizations simply not keeping up with the times.

If we just take a few steps back we can truly see what is really going on in our industry – and the real picture looks bright! “The so-called ‘retail apocalypse’ makes for a great headline, but it’s simply not true. Over 4,000 more stores are opening than closing among big chains, and when smaller retailers are included, the net gain is well over 10,000 new stores,” says Greg Buzek, president of IHL Group.

Let’s take closer look at some additional numbers:

  • Consumer confidence was better than expected in August, beating economists’ projections and pushing the consumer sentiment index rising to 97.6. "Consumer confidence rose in the first half of August to its highest level since January. This is due to a more positive outlook for the overall economy, as well as more favorable personal financial prospects," said Richard Curtin, chief economist for the Surveys of Consumers.

  • According to the NRF, American ports took in the equivalent of 1.72 million 20-foot containers in July, just shy of a record. In preparation for this year’s upcoming holiday shopping season, retailers are currently stocking up on inventories due to rising consumer confidence, which in July hit its second-highest level since 2000, according to the Conference Board.

  • The Commerce Department recently reported that retail sales increased 0.6% in July, the best showing since a gain of 0.9 percent last December. As well, the NRF reported that US retail sales increased 4.1% in the first quarter of 2017 compared to 2016. As IHL Group’s Greg Buzek recently wrote, “We have a $4 trillion industry that is growing at a rate of over 4% year to year – that’s nearly $100 billion in growth in 5 months.” Consumer spending accounts for around 70% of economic activity, so the latest result is a good sign for overall economic growth.

These are all very good signs for the retail industry as we head into the holiday season and into 2018.

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