OPERATIONS

Survey: Poor in-store experiences driving showrooming

BY Staff Writer

Evanston, Ill. — Many consumers who visit a store but then buy online are not driven there by price alone, but rather by a less-than-satisfactory in-store experience, according to results from the annual holiday shopping report by the Kellogg School of Management at Northwestern University.

The survey found that 59% of shoppers sampled said they received poor or average service in the stores they recently shopped. And, among shoppers who said they engaged in showrooming, 40% reported that they actually never intended to buy online, but they were driven there after experiencing poor customer service and support in stores.

"The showrooming conversation typically focuses on price as the impetus to purchase online," said Eric Anderson, Hartmarx Professor of Marketing at Kellogg. "While the growth in online shoppers is clear, our data shows that there is still a robust segment of consumers who prefer to shop brick-and-mortar stores. For retailers, this reinforces that how consumers want to shop is as strategically important as the price they are offered, and underscores the importance of face-to-face customer service."

Other findings from the Kellogg Shopper Index include:

  • Shoppers are more optimistic this season; 59% of respondents report that their household financial situation will be better in the next year. More than a quarter said they were planning on spending more on holiday gifts for others compared to last year.
  • Female shoppers are more loyal to their favorite stores, but are being lured into low-touch online channels because of poor or frustrating in-store experience.
  • Men with higher education levels and higher incomes are more likely to seek discounts by showrooming and engaging in mobile buying than women.
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FINANCE

Fitch: Reallocation of market share remains key retail ratings driver in 2013

BY Marianne Wilson

New York — Market share defensibility remains a key challenge for many traditional U.S. retailers, against a backdrop of minimal growth and heavy competition, according to a Fitch Ratings report. (Fitch views trends in market share as a key indicator of a company’s long-term financial outlook.)

In view of the strong growth in online sales and other alternative formats, traditional retailers that are willing and capable of investing in a multi-channel strategy will continue to drive market share gains at the expense of retailers that struggle to maintain relevance in a mature but dynamic sector, the report said. In addition, retailers that in general lack a sound strategy and financial resources to fend off competition are more susceptible to the negative rating pressure.

While Fitch’s overall credit outlook for the U.S. retail industry is generally stable for 2013, there will continue to be a modest negative tilt to rating activity.

Fitch expects 3% to 4% total retail sales growth in 2013, similar to 2012 levels, driven mainly by 2% to 3% in same-store sales and modest square-foot expansion. Fitch expects slow improvement in employment levels and flat to lower wages, which could be further affected by food inflation next year, will translate into uneven comps performance among retailers.

Fitch also expects holiday retail sales to grow at 2% to 4% a decline from 5.6% in 2011. The lower end of the range reflects Fitch’s expectation that the aftermath of Hurricane Sandy could dampen consumer spending through the holiday season, particularly in the Northeast and Mid-Atlantic states, and a potential modest effects from the uncertainty surrounding the impending fiscal cliff.

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FINANCE

White House reports says fiscal cliff could take bite out of retail spending

BY Alaric Dearment

Washington — Consumer spending could drop by almost $200 billion next year while depressing real consumer-spending growth by 1.7% if middle-class taxes rise in response to the fiscal cliff, according to a report released Monday by a White House economic team.

The report, “The Middle-Class Tax Cuts’ Impact on Consumer Spending & Retailers,” by the President’s Council of Economic Advisers, found that the reduction in consumer spending would be about four times the total amount spent by $226 million on Black Friday last year and would likely spread across all areas of consumer spending.

The report noted that a typical family making $50,000 per year has received tax cuts totaling $3,600 over the past four years, and more if it was putting a child through college. President Barack Obama and congressional Democrats want tax cuts for families making $250,000 or more per year to expire while keeping in place those for families making less than that, while congressional Republicans want to keep the upper-bracket tax cuts in place.

In response to the report, the National Retail Federation called for steps to avoid the fiscal cliff — the set of tax increases and spending cuts scheduled to kick in automatically at the beginning of 2013 if Congress and the president fail to reach a deal on spending — but also for reforms of the tax code that would help reinvigorate the economy and address the nation’s deficit.

“It is encouraging to see the administration acknowledge that retailers and their customers will be among the hardest hit if our elected officials fail to address ongoing economic uncertainty,” NRF president and CEO Matthew Shay said. “However, just kicking the can down the road by cherry-picking reforms only serves to reinforce the well-placed fears of American consumers and retailers that the status quo will once again rule the day. If brinkmanship overtakes bipartisanship, we will continue to see less capital investment by retailers large and small, stifled job creation and dampened consumer confidence, which will ultimately lead to lower retail sales and potentially another recession.”

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