December 4, 2008
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News: Retailers' Future
What is the future outlook for retailers? Weaning off so much dependence on credit cards and devising strategies for more spaced-out shopping. They have already tried the tactic of reducing inventory, but that had the effect of turn off shoppers with dissatisfaction from the limited choices. Branding their own credit cards (private label cards) is another avenue retailers are promoting, even though these branded cards are subject to similar liabilities that inhibit the main credit card industry is facing.
As far as the outlook, the retail industry is expecting the hard times to last awhile. One negative effect of reducing liability has been reducing spending limits on private-label credit cards. The problem is that card holders are also limited as to how much they can buy from the retailer. Retailers' credit card divisions were showing triple-digit million dollar losses just in the second quarter.
Other strategies to combat the credit card crunch deal with marketing. The retailers plan to promote more discounts and launch other promotional campaigns earlier in the year than they have in the past. They realize that, without credit, consumers are more likely to spread out their buying more evenly, as they want to have the cash on hand before buying. Lay-away programs are coming back after dwindling away over the past few years. Financing is picking up a little bit but, this is still a debt liability with today's economy.
Meanwhile, the Fed is stepping in to help out some. It is forming ‘security-backed protection' to alleviate credit card liabilities. But these initiatives aren't expected to be in place before February of next year, long after the Christmas season has passed. Even with all this, the fact is, the job market as bad as it is, is still going down the tubes. Recovery isn't expected before 2010. Consumers are becoming more conscientious of living beyond their means (which have fallen badly). They are finally coming to the harsh realization that "The economy is fundamentally sound" was a lie. So in effect, they're just not spending as much.