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Fiscal Cliffhanger

BY Jeff Green

Whatever your political views may be, it’s hard not to think about the impact of the recent presidential election on the consumer psyche, and ultimately our industry. Whether President Obama or Mitt Romney would have been better for the economy in the long run is an issue I’ll gladly leave to the political experts and historians. But I do think that, in the near term, we are less likely to see the big holiday spending numbers that some analysts were predicting.

Though it may have seemed like it over the past few months, the election isn’t the only issue weighing on the minds of holiday shoppers. With the economic recovery just “limping” along, the recent damage and disruption from Hurricane Sandy, and the onslaught of media stories surrounding the potential for next January’s so-called “fiscal cliff,” it’s hard right now for anyone to see the potential for happy holidays. And, although most people probably don’t even understand what the “fiscal cliff” might mean for their finances and families, the weight of repetitive bad news can inevitably take its toll on consumer confidence.

If the retail behavior of shoppers this holiday season is dragged down — even slightly — by all of this bad news, consumer spending could be curtailed enough to have a measurable impact on holiday sales. This makes me think that the widespread sunny predictions we have seen from some analysts showing holiday spending increases of up to 5% may be a little too robust. I suspect that a safer bet would be to dial back the optimism into the 2% to 4% range. One wildcard which could paradoxically help keep cash registers ringing is the fact that many meteorologists are forecasting a slightly chillier than normal holiday season. An early chill in the air may actually spur some sales, as it tends to get people into the holiday spirit a little earlier than if parts of the country are basking in warmer-than-usual temperatures.

No matter how the holiday shopping season ultimately shakes out, the hype surrounding holiday discounts is already in full force and unlikely to change in any significant way. Similarly, I don’t see 2013 expansion and repositioning plans being dramatically altered at this point either, no matter what happens over the next few weeks. While the holiday shopping season has become an increasingly significant chunk of many retailers’ annual sales, even a somewhat disappointing holiday haul shouldn’t necessarily detract from broader economic trends that continue to slowly but surely move in the right direction.

The bottom line is that my crystal ball remains cloudy beyond the end of the year. Because the 2013 “fiscal cliff” represents such profound uncertainty, I think even the most plugged-in retail analysts would be hard pressed to make an accurate prediction without having a better sense of how that issue will be resolved. And, while consumer sentiment is a very important metric with some very tangible consequences, I don’t think the psychological impact of these outside influences will have any long-term negative impacts on our industry. The best advice I can give to retailers and retail real estate professionals is to keep moving forward. We’ve proven to be resilient before. We can certainly prove it again.

What do you think? Please make a public comment below or feel free to e-mail me privately at [email protected].


Click here for past columns by Jeff Green.

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Asian innovation keeps Coke cool

BY CSA STAFF

Think the Coke Freestyle machine with its more than 100 beverage options is cool, check out what’s happening in Japan where Coca-Cola has developed something called the peak shift vending machine.

It’s being called the most innovative vending machine of the past 50 years by Coke representatives in Japan because after running at night when power consumption is lowest the machine can deliver cooled product for 16 hours the following day. The result is a 95% reduction in daytime power consumption during summer months and a 20% reduction during winter months.

Development of the peak shift machines began last May, several months after a major earthquake and tsunami rocked Japan, by Coca-Cola Japan and Fuji Electric Company. Field and laboratory testing was conducted this past July and now Coke is ready to move forward with a 10 billion yen ($123 million U.S. dollars) investment in 2013 to install 25,000 of the machines throughout Japan.

"After the earthquake disaster last year, the need to reduce energy consumption has increased and we take our responsibility as market leader very seriously," said Tim Brett, Coke’s EVP and general manager of franchise operations and commercial leadership. "With these peak shift vending machines, we have realized environmentally friendly innovation. These could be called the most revolutionary vending machines in the past 50 years of vending machine history. Vending machines have evolved in many ways over the past 50 years, but peak shift vending machines are a breakthrough in the true sense of the word and I am sure that they are the most important innovation yet."

The huge reduction in daytime power usage required Coke and Fuji to re-imagine the vending machine and integrate new technologies and materials into the design. Koji Sugimoto, general manager Fuji Electric Company’s food and beverage distribution business group explained it this way.

"Conventionally, power consumption is controlled by only cooling the minimum amount of products necessary. However, peak shift vending machines brought forth the idea of cooling all products during the night and not allowing that cool air to escape during the day. This was realized with improvements to thermal insulation and air tightness, Sugimoto said. "The use of large amounts of vacuum insulation materials, which boast 10 times greater thermal insulation performance than conventional urethane materials, successfully resulted in the cooled products themselves maintaining the cool air environment within the machines."

The new design also means the time required to cool products placed in vending machines at room temperatures has been reduced by 25%.

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Moody’s: Holiday sales to grow 4.5%; earnings to grow at 3.5% to 4.5% in 2012

BY Marianne Wilson

New York — Retail sales growth in the United States will rebound from the third quarter this holiday season, but will be down on the previous two years’ robust gains, according to a new report by Moody’s Investors Service. The study, "Holiday Sales Will Overcome the U.S. Fiscal Policy Grinch," also finds that earnings growth will be slightly stronger.

“We expect holiday sales growth of about 4%, down from 6.5% in 2011," said VP, senior credit officer Margaret Taylor. "But while sales will be down, earnings are on track to grow at 3.5% to 4.5% for the full year 2012, compared with 2.7% last year."

Online spending will be a bright spot for retailers this holiday season.

"We expect online spending to increase about 15% year over year, far outpacing the growth in overall holiday sales," Taylor said.

Retailers whose goods are perceived to provide good value are expected to perform well, as are the toys, electronics and party goods segments. In electronics, the new Kindle and iPad, Nintendo’s Wii U and new game releases will drive sales this holiday season, though heightened price competition may constrain margins. Apparel retailers’ earnings will continue to benefit from lower commodity costs, particularly for cotton, as well as easy comparisons with last year’s weak sales.

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