CHRISTMAS MADNESS!
Retail Sales – Consumers Versus the World
By Rodney Johnson, Senior Editor, Economy & Markets
Thanksgiving Day, Black Friday, and Cyber Monday for 2015 are all history, and if recent reports are correct, they each were disappointing when it came to commerce.
We, as consumers, apparently are not holding up our part of the bargain by braving the early morning hours, sometimes inclement weather, and wrath of other shoppers, to elbow our way to unbelievable savings on that G.I. Joe with the Kung Fu grip (do they make those anymore?).
Apparently, we are still cheating our employers by spending hours on Cyber Monday trolling the net for a proverbial door-buster, but not enough to offset the slower sales on Turkey day and Black Friday.
If the goal is a healthy economy, then this trend should worry us all.
Retail sales make up about 70% of all economic activity. Every time we buy a doll, car, home, pizza, or gallon of gas, we are putting money to work in the economy. In doing so, we create income for other people, and tax revenue for the relevant city, county, state, transportation district, special commerce zone, and redevelopment enterprise. When we spend less, businesses, workers and taxing authorities all lose out.
A company with lower sales has some decisions to make. Should they cut prices, cut workers, cut orders, etc.? Each action goes up the line, affecting employees and suppliers, who then have to make their own choices.
Taxing authorities (except the federal government, apparently) also have to make choices, since they typically have balanced budget requirements.
If tax revenues come up short, then cuts must be made. Services might shrink, along with headcount, and once again this travels up the line to whomever was receiving services along with employees.
Of course, all of this ignores the basic question of why retail sales might fall in the first place.
It could be a perfectly logical reason, such as consumers aren’t in a position to spend more because median family income remains stagnant. Or perhaps consumers, who are the same people that must prepare for their golden years, have decided that spending more today is a bad idea when those same dollars could help fund a more comfortable retirement tomorrow.
But logic has no place here. According to our all-knowing government officials, at this time of year consumers are supposed to spend more no matter what.
If their earnings are light, then they should dip into savings. If that doesn’t do the trick, then they should turn to credit. Anything less is a sign of irrational fear of the future, instead of simply good stewardship.
This view must be the case, or else our financial system would have built in the possibility of higher savings and – gasp! – lower retail sales. We would have large reserves for those times when consumers decided to defer their material gratification by using their funds to pay down existing debt or sock away more for the future.
Instead, what we have is a system with no room for error, and certainly no room for contraction. Like a shark, we must move forward, or risk death.
So as you spend the next two weeks contemplating what to get your nephew’s fiancée for Christmas, or if you should be buying presents for such distant connections at all, understand that the world rests on your shoulders.
We can’t have you taking the high road, cutting back on spending and building a bigger nest egg. That’s for worriers and planners.
What we need, what we must have, are profligate spenders who get the greatest joy from the next dollar spent, the next reward point cashed. We need those people who don’t calculate how much they spent at a sale, but how much they saved! The bigger the number, the better!
For all of you feeling weary of spending, which is obvious from the flat nature of retail sales over the past few months, take a moment to breathe.
Step away from the cash register or the keyboard, and consider for the moment that we collectively hold the fate of the economy in our hands. Should we jump back in, credit cards in hand, spending with abandon to keep the ship afloat – or should we build ourselves a financial life raft and jump overboard?
Tough call.
Rodney
Follow me on Twitter @RJHSDent
Brian's Comments:
I used to be a retailer ! Now I supply some wholesalers and promotion companies. Im a sourcing guru, an expert quoter and a manufacturer of some products that people like. I have 15 years QC experience in China so I suppose I've dipped into all departments of the supply chain and therefore Im supposed to know products, understand people, and how market tastes, desires and needs change. But I will still never understand the mood of a raging crowd of crazy shoppers who leave everything to the last minute. The internet at least has saved many of us from the image below!!!
HAPPY CHRISTMAS SHOPPING NETWORK TEAM.