In its latest read of online retail sales, data analytics firm DynamicAction said the heavy pace of markdowns that occurred in the fourth quarter of last year continued through to the first quarter with March experiencing a particularly sharp increase in sales.
Meanwhile, in a separate report from Telsey Advisory Group, analysts at the firm said despite sagging first-quarter results across the market, specialty apparel retailers are better positioned than other segments.
In its “Retail Index: Spring 2016” edition, DynamicAction said the number of full-price online retail sales transactions fell 4 percent in the first quarter compared to last year while the number of promotional transactions rose 63 percent. In March, the number of promotional retail transactions showed an 86 percent year-over-year gain. The data was culled from $5 billion in retail sales transactions across a variety of categories.
The researchers also said in the report, which was released at Shoptalk, being held in Las Vegas, that “retailers found it harder to convert first-time buyers into second-time buyers, with those conversions down 6 percent compared to last year.” The researchers said revenues showed a 10 percent gain in the first quarter, but added that “retailers’ ability to control profit has been unstable in early 2016.”
The company said overall retail profits were up an average 5.2 percent compared with the same period last year, “however, most gains occurred in January, with increasing volatility in February and March.”
John Squire, chief executive officer and cofounder of DynamicAction, said that the “antiquated strategy of retailers relying exclusively on their promotional calendars to run their operations has fostered an ingrained need for discounts by consumers, who are increasingly being trained to wait for promotions or discounts prior to making a purchase.”
Squire said retailers looking to position themselves for success this year are “focusing on curbing the promotional addiction and utilizing their full data set to better manage inventory and operations.”
In the fashion apparel space, department store results reflected an overall lackluster spending environment in the first quarter that even the steepest of markdowns couldn’t cure. Last week, quarterly results that missed the mark from Macy’s Inc. and Nordstrom Inc. rattled the entire retail sector while also driving down the entire stock market.
In the Telsey Advisory Group report this morning, analysts at the firm said “it is clear that the first quarter was a struggle across the retail landscape.” The firm noted that after a “stronger start to the quarter in February and the first half of March, it is apparent that retail traffic trends fell off significantly in later March and through April.”
The firm said of the eight retailers who report monthly comps, “seven missed market estimates by an average of 3.7 percent” for that period.
“Whether due to a distracted consumer, increased competition, a lack of fashion newness, or unfavorable weather conditions, it is clear that the first quarter was a struggle across the mall,” said Dana Telsey, chief executive officer at Telsey Advisory Group. “However, we see the specialty channel as healthier than the department store channel. Overall, we see the specialty channel as better positioned from a competitive standpoint than the department store channel. Brands remain the entry point for consumers, and the specialty channel has many that are not available in department stores.”
Telsey said that “as owners of the brands they sell,” specialty retail operators have the “benefit in this omnichannel landscape to be the natural search result.”