No Retail Pricing Power
The Commerce Department reported today that July retail sales were down 0.1% from June, and down 8.3% from July 2008. Of particular concern was that excluding autos, retail sales were down 0.6% from June, and 8.5% year over year. In sector after sector, continuing weakness. None of this is a surprise to independent retailers, who continue to struggle on the top line, along with everybody else.
Retailers large and small have absolutely no pricing power right now, both in core staples, but especially in discretionary goods. They can maintain unit sales with deep discounts, but absent those discounts they can't generate units. They can't move the top line, margins remain under pressure, and corporate earnings continue to be driven by cost cutting. It's not a good formula, and the longer the consumer holds back, the more it becomes a cultural norm rather than just a rational economic response.
Independent retailers must be prepared for the long haul. Any sales increases will have to come from taking market share from competitors, and that requires that value propositions, customer experiences and execution outshines all others.