Like Automakers and Their Dealers, Retailers Ask Where are Consumers?
By Michelle Krebs August 18, 2010
Retailers are asking what automakers and their dealers have been as well: where are consumers, and what will it take to lure them into their stores?
Wal-Mart and Home Depot, which both reported quarterly earnings Tuesday, posted better-than-expected profits. However, both acknowledged American consumers are not spending as much as they had expected despite the great deals being offered.
July car sales were similar: underwhelming in light of the hefty and abundant incentives available. So far in August, Edmunds.com's monitoring of vehicle retail transactions show some increase from last month, beyond the seasonal norm.
"We thought July would be a better sales month, so that is somewhat disappointing," Edmunds.com Senior Analyst Jessica Caldwell said. "We thought incentives would draw in a lot of people, and to some extent they did."
But, she added, "there's still consumer hesitance. The bottom lines for people, personally, haven't changed a lot in terms of their income and how they feel. People are still struggling."
Indeed, Wal-Mart found the same as its customers livine paycheck to paycheck, found the same. The world's largest retailer said its aggressive discounts did not work as hoped, and it is now re-thinking its strategies to lure customers in, including deep price cuts.
Even though we had some fairly dramatic price reductions, those reductions weren't enough to drive the traffic we had hoped for," Wal-Mart CFO Thomas M. Schoewe told reporters in a conference call. "The customer's under pressure, and that's the main reason why the rollbacks didn't work as well as we had hoped."
Home Depot said fewer consumers than hoped spent on large home improvement projects and big-ticket items like appliances. As a result, the retailer has lowered its sales forecast for the year.
One retail analyst told The New York Times things are getting worse, not better, for consumers.
The paper reported that luxury retailer Saks had a second-quarter loss but it was less of a loss than expected. Saks had reduced prices at the start of the recession but shifted strategies to keeping inventories tight and selling more items at full price. Saks is promoting smaller ticket items like handbags as a way to update customers' wardrobes without having to buy an entire, a Saks representative told the paper.
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