Even with holiday sales projected to increase modestly, retail looks to be in for a long haul and by the time unemployment falls to a more manageable level, the landscape is likely to be much different and much more digital.
This story first appeared in the November 2, 2011 issue of WWD. Subscribe Today.
Over the next three years, more than $8 billion in apparel sales will migrate from brick-and-mortar stores to the Web, according to Andrew Mantis, senior vice president and group head of MasterCard Advisors’ merchant vertical who addressed attendees of the Retail Marketing Society’s holiday outlook conference at the Fashion Institute of Technology on Tuesday.
The online shopper is a different type of creature, though, with its own habits and challenges for marketers. For instance, Mantis said the Web accounted for more than 25 percent of total retail and e-commerce sales on Tuesdays in September, but accounted for less than 10 percent of the total take on weekends.
And Amazon.com, which is starting to ramp up its apparel business, is leading the way online.
Scott Devitt, an Internet analyst at Morgan Stanley, talked about “The Amazon effect” and how the Web superstore is forcing the market to be more competitive in much the same way that Wal-Mart Stores Inc. forced other retailers to lower their prices.
Amazon accounts for about 8 percent of total e-commerce sales, but only 0.5 percent of overall retail sales, Devitt said. But the company profits come from facilitating sales for third parties. “They don’t make a heck of a lot of money on inventory they own,” he said.
The industry’s increasing focus on online business comes as the economy fights its way out of a deep hole following the housing bust, the financial crisis and the deep recession.
Economist James Glassman, managing director at J.P. Morgan Chase & Co., said even with steady economic growth of 4 percent — and the economy is currently growing at just 2.5 percent — it will take a decade to get back to full employment of 5 percent.
Even so, Glassman said the economy’s problems rest more with the housing market than the consumer.
“When I look at, ‘Where are the problems?’ it’s not the consumer,” he said. “Consumer spending’s higher than it’s ever been.”
But he acknowledged that the economic metrics, which indicate a recovery, tend to “look better than they feel.”
Glassman said the economy would benefit from strong corporate profits and a weak dollar, which helps manufacturers who are selling overseas.
“In the U.S., the lights are coming back on in the manufacturing sector,” he said.