Retail

Footfall Worries US Retail Despite Strong Holiday Season

Despite a record-breaking holiday season for retailers in 2018, the strength of the industry’s recovery is being called into question as data emerges that shows declining traffic in stores and a slowdown in the rental growth at malls.

According to a report in The Financial Times, also weighing on the recovery is a slowdown in demand for consumers electronics. Pointing to data from ShopperTrak, which tracks the gifts American buy online, the holiday selling season marked the second year in a row that consumers shopping in stores declined 3 percent year over year.  Meanwhile, the report pointed to landlords of retail locations, which aren’t being as aggressive in what they charge for rent as vacancy rates increased thanks to the likes of Toys R Us and Sears going under. For the last quarter of 2018, The Financial Times reported the price of rent increased 0.8 percent when compared to the last three months of 2017. The FT cited Reis, the real estate data provider, for the data.

Heading into the holiday shopping season, executive at retailers were predicting a strong shopping season thanks to the strong U.S. economy.  And while Mastercard reported strong spending during the holiday shopping season — and companies including Macy’s, Target and Costco are expected to issue good news in terms of shopping during the holiday season — there are concerns about the profitability and the sustainability, given Amazon has been forcing retailers to offer all sorts of perks such as free shipping that weighs on profits. “Consumers had money to spend, obviously,” said Charlie O’Shea, lead retail analyst at Moody’s, in an interview with the FT, cautioning there has been “pretty heavy” discounting in some sectors of retail, including children’s toys and clothing.  “The question is, what’s the cost that retailers had to bear to get those sales,” the analyst said in the report.

Weighing on analysts’ concerns is the warning out of Apple, which showed demand for iPhones was lackluster, particularly in China. When issuing an earnings warning, Apple chief executive Tim Cook blamed weakness in China and also said fewer than expected people were upgrading their iPhones in some of the developed markets.

 

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