Green Shoots and Retail Category Rotation
Much like sector rotation in the stock market, where an industry emerges as a leader in shaping investor sentiment while another industry loses its leadership position, category rotation in retail can often foretell changes in consumer sentiment.
When business for women's apparel retailers as a group started to soften in mid-2007, there was a discernable shift in leadership between categories. Until that point, dresses had led business forward across most retail segments and price points. Then, there was a pronounced shift in leadership, to accessories, and to a lesser extent bottoms. A similar thing happened in the furniture business, where leadership shifted from upholstered and cased goods into ‘smalls', less expensive items such as occasional tables, lamps, pictures and other accents, items that ‘redress' a room rather than make it over altogether.
In the past several months there have been hints in the client data that I look at, primarily in women's apparel, that category leadership is beginning to shift again, and in the last four to six weeks the data has been even more pronounced. This isn't to say that the decreases have become increases, only that as business stabilizes, dresses and tops are starting to outperform accessories and bottoms, when for months it had been the other way around.
Category rotation of this sort is an important indicator, a ‘green-shoot' suggesting that things are beginning to turn around. Watch your sales carefully for signs of category rotation in your business. It will be an indicator to review your forward sales plans for adjustments in the contribution of each category to the whole.
Just as sector rotation in the stock market signals a turning of that market, category rotation is a signal that consumer sentiment is turning, and that an upturn may not be far away.