December 4, 2008
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News: No Jolly Season for Retailers.
Retailers are taking a beating this year. All year they anticipate shoring up their balance sheets with abundant Christmas holiday shopping. But this year's different. Because of the deeply troubling credit card crunch, shoppers just aren't doing their thing. Some credit card holders are just holding off. Other credit card borrowers have had their borrowing wings clipped. All this is restraining retailers from selling. So far, they are posting dismal sales that are the worst they've seen in 30 years. Not only is this condition not moving our consumer-driven economy forward but, it is threatening the existing consumer market with further massive lay-offs.
About 30 major retailers in our nation have already reported an average drop of 2.7 percent of the sales they enjoyed this time last year. Consumer spending is known to account for the bulk America's economy and even that is driven by the use of credit cards. But this year, more and more consumers are shying away from their credit cards.
Analysts at Citi Investment Research have determined that credit card spending for this year has already dropped by at least 5 percent. As a result, major retailers like Circuit City are already in bankruptcy. The Nilson Report has been tracking the use of credit cards for years now. They reported strong increased growth in the double digits between 2004 and 2006. But last year it dropped to only 8 percent and projections for this year are only 3.3 percent.
Obviously, loss of jobs and reduced pay are the two major reasons for this. It's very unhealthy to see increased credit card borrowing coupled with dwindling pay. Blame the Bush admin for making it so easy to ship our good-paying jobs overseas while advising our consumers to go out shopping. Expect things to get much worse as all this damaging storm of irresponsibility makes land fall. Jerry Welch is the head of nFinanse, which is a prepaid card service. He was previously the chief executive of FAO Schwarz. Mr. Welch sums it up well for the unfortunate retail industry in these words: "If you're a retailer right now, you see the contraction in consumer debt as a problem. There's no way you can be a retailer and look out and see people being maxed out on their credit cards and think it's good for you."