Consumer Confidence, Independent Retailers, and the Coming Months
A day after the major retailers reported disappointing same-store sales for June, the Reuters/University of Michigan Surveys of Consumers was released this morning, echoing yesterday's sales report, and confirming earlier reports of slipping consumer confidence.
The Reuters/University of Michigan Survey of Consumers index of confidence for July came in at 64.6, down from 70.8 in June, and was the first decline in the index since February. An accompanying statement said, "Consumers concluded that the economic downturn would last longer and their personal finances would not recover as quickly as they had previously expected."
This confirms the latest Conference Board Consumer Confidence Index, released last week, which also showed a decline in June, to 49.3 from 54.8 in May, the first decline for that index since February as well. In that report, both the Present Situation and the Expectation indexes, components of the overall index, showed declines, although the Expectations index continues to reflect consumer's expectations that things will be improving.
In the Conference Board's accompanying statement, Lynn Franco, Director of The Conference Board Consumer Research Center said, "The decline in the Present Situation Index, caused by a less favorable assessment of business conditions and employment, continues to imply that economic conditions, while not as weak as earlier this year, are nonetheless weak. Looking ahead, Expectations continue to suggest less negative conditions in the months ahead, as opposed to strong growth."
The souring of consumer confidence was certainly reflected in the June sales reports, and has to be discouraging to retailers of all shapes and sizes, but particularly smaller and independent retailers who rely more heavily on consumer discretionary spending. It's now becoming evident that the back half of the year may very well turn out to be as difficult as the first half was. Clearly, continuing job losses appear to be the primary factor weighing heavily on the minds of consumers.
As I wrote yesterday, every smaller and independent retailer must approach the coming months with great caution; with conservative sales plans that reflect current trends, lean inventories focused on value driven assortments, and a strong bias toward preserving cash. It's going to remain essential that marketing initiatives focus on reaching out to proven customers, that each engagement be personal and sincere, and that the overall customer experience contribute even more value to the value proposition.