stella storm boston

Adverse weather — including snowstorms across large portions of the country — coupled with concerns over the ongoing government shutdown ate away at weekly retail sales as measured by the Retail Economist-Goldman Sachs Weekly Chain Store Sales Index.

The report follows the release of several research notes from analysts trying to figure out how retail and apparel sales will shape up this year. The most recent from AlixPartners sees ongoing erosion of the middle market of traditional retailing while “digital native” brands gobble up market share across the board.

In the weekly sales report, for the period ended Jan. 19, the index showed a decline of 1.3 percent. “On a year-over-year basis, the latest week’s sales pace advanced by a sluggish 0.7 percent,” said Michael P. Niemira, chief economist of the Retail Economist LLC.

“A combination of adverse weather and low seasonal volume of sales often accentuates volatility at this time of the year and these factors certainly seem to be at play in the latest sales weakness,” Niemira said, adding that “the uncertainty associated with the partial government shutdown also may be a partial explanation for some of the recent weakness in sales, but that is difficult to accurately assess.”

In the AlixPartners report released this morning, managing directors David Bassuk and Joel Bines predicted that digital native retailers and brands will “continue to win share from traditional retailers.”

“Brands that were born on the Internet have data in their DNA and know how to leverage it to understand customer behavior and choices,” Bassuk said. “There will be continued growth and evolution of business models such as clothing rentals (à la Rent the Runway), second-hand resale (like The RealReal), subscription services (such as Play by Sephora) and assortment boxes (like Kidbox) creating greater top-line pressure for legacy retailers.”

Bassuk and Bines said these digital natives “will continue to gain market share on the back of delivering a highly personalized customer experience despite their nimble operations footprint — a feat too hard for legacy brands.”

The managing directors also said in the traditional retail segment, “the ends of the barbell continue to win.”

“The two ends serving the consumer spectrum — luxury and discount — will continue to give customers a reason to visit the store, by delivering either a great experience or a high value,” they stated in the report. “Retailers in the middle-price tiers will get dragged down by too many stores facing under-investment. They will continue to lose market share, getting stuck in a repetitive downward cycle as consumers search either for the best value or a differentiated experience.”

load comments
blog comments powered by Disqus