Major retailers are gearing up for the Christmas season, but to succeed in the long term, they are having to reconcile the changing way of doing business. As the economic conditions show improvement, their business strategies have change to take into account how consumers are changing the ways of shopping.
The Westpac Melbourne Institute Index of Consumer Sentiment report for September noted that since the government first started cutting interest rates in November 2011, the index has risen 13.8%. The influence that each rate cut has on the economy takes at least 6-12 months to appear in the economic data on the average.
The conclusion of the federal election also may be affecting consumer sentiment. This happened in the past when, according to the report, in 1996 the Coalition won the election after 13 years of being in opposition, showing a 6.5% rise in the index.
The report added that households had more concern of unemployment expectations, and this feeling of weak job security has played a part in weaker consumer spending.
Until the market in general turns, how are retailers attempting to improve sales and their store strategies?
Harvey Norman (ASX: HVN) has switched from resisting the online sales movement to embracing it by building up an online channel that garnered the “Best Multichannel Retailer of the Year” award, and works in conjunction with its 180 physical stores so as not draw sales away.
David Jones (ASX: DJS) and Myer (ASX: MYR) and are also throwing away their last resistance to online retailing by developing customer loyalty programs tied into revamped online sales sites that encourage shoppers to see much more of total products available. Dedicated distribution centres for online sales will be helping Premier Investments (ASX: PMV) and Myer cut shipping and handling costs and times down, and creating savings for their bottom line.
JB Hi-Fi (ASX: JBH) is rolling out its JB Hi-Fi Home network of new stores that will include home appliances along with its regular electronics products. This will coincide with the improving housing market when shoppers will want new items for their new homes.
Retailers have always had to move and change quickly to market demand, and they are experiencing a transformation in the style of shopping away from the old department store tradition. When competition is fierce, they have to adapt even more. As an investor, you can use your own shopping experience and habits to see what stores have the edge on the others.
Also, visit your local shopping centres and malls, and note where people are going and shopping. This may not show you how online sales are, but when people go into to pick up items they ordered online, they have a tendency to pick up others while in the store. Consumers vote with their feet, so be like a retailer yourself, and always look for good floor traffic.
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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned.