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Second Quarter GDP and Independent Retailers

  
  
  

On Friday, the Commerce Department reported that second quarter GDP declined at an annualized rate of 1.0%, after declining a revised 6.4% in the first quarter, and 5.4% in the fourth quarter of 2008.  

The Q2 decline was less than many economists had expected, and represented a clear improvement over the prior couple of quarters. Nevertheless, much of the improvement was driven by smaller than expected declines in exports, business investment and inventories.  

There is some news on the demand front, as well. The federal "Cash for Clunkers" program has already burned through its much of its initial funding, and Ford is expected to report that their July sales represented the first year-over-year sales increase in two years. Still, broader consumer demand still remains anemic.  

For independent retailers, this is all important news, but not an indication that a dramatic improvement in retail sales is on the horizon. The specialty retail sector, which most independents fit into, was the first to feel the beginnings of the downturn two years ago, and will likely lag other retail sectors in the recovery.  

Independent retailers must go forward under the assumption that rather than experiencing a rebound, retail sales will begin to grow again modestly from this new baseline. In this environment, any sales growth beyond that will have to be earned one customer at a time by providing exceptional value, through aggressive marketing outreach, in order to claim a greater share of each customer's pocketbook.

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