The week after Christmas is usually one of my favorite weeks of the year. First, it means that Christmas is over, with all of its sometimes-mean, procrastinating customers (I’m a retailer) and meeting the perfect-Christmas expectations of friends and family. Bah humbug is right.
I managed to get down to the Southcenter Mall on the 26th to wade through the post-Christmas carnage. I didn’t get there in time for the parking lot shootings, but there’s always next weekend. Maybe the shop local campaigners could point out that there are 100 percent fewer shootings in Maple Valley stores; that might help their efforts.
Anyway, at the mall, I was surprised to see how little was left on store shelves. Forget finding anything in 2XL; only people who wear small and medium (or have no taste in clothes) have anything left to choose from.
It was a big reminder of how different this Christmas retail season seemed from previous years. Stores are much more willing to sell out of items early, rather than be stuck with a lot of excess inventory. Not that there is a lot of excess inventory to be had; Chinese factories are operating at full capacity, and have doubled the length of time it takes to get stuff made.
I get to see this firsthand, with some of my store’s most popular items being out of stock until March or even June in some cases. It’s due to tougher quality requirements, a shortage of cheap, skilled labor in China (yes, really!), and record high prices on commodities such as copper and cotton.
The high costs of materials mean that the pressure is on the factories to squeeze out more profits in labor or on the product itself. For example, I have one item in my store that regularly sells for $19.95 every Christmas, and we usually sell about 2,200 of them every year. This year, due to higher commodity costs, the price was bumped to $22.50, and we only sold about 1,800. My competitors are also reporting the same drop in interest.
Manufacturers are under pressure to hit those “magic numbers”, like $19.99, $49.99, and the price of last resort for the masses, $99. Anything that steps over those numbers is in another world of consideration for price-sensitive shoppers.
To meet those magic numbers, manufacturers usually have to cheapen the product in addition to cutting their labor costs. A part that used to be made in steel is now made in plastic. Where it’s still made with steel, it’s now much thinner and weaker. The carrying case is now sold separately, instead of being included. But it’s still $99.
Back when it was the Bon Marché, the local product buyers had to fill up their main aisles with magic number junk, such as the $19.99 all-in-one clock/radio/golf tool/quesadilla maker. They had a saying for these items, “Stack ‘em high and watch ‘em fly.” It didn’t matter what it was, it just had to sell, and be at the magic number.
The ultimate goal has become to get the best price, and not the best product. That’s led to the next big trend I saw this year; people using their smart phones to compare prices while they’re standing in the stores.
We’re just starting to see the beginnings of a huge shift in retail pricing thanks to this. You can stand in a Best Buy, compare prices on a camera, and decide whether to buy it online or in the store depending on the price. Best Buy has started to fight back with shopping applications for your phone that will notice if you are shopping for an item, and you’re in one of their stores. Special deals will pop up just for you, so they can get the sale.
Manufacturers are fighting back with price-protecting strategies. If you’ve ever wondered why the 32 GB iPod sells for $299 in every store, it’s because Apple forces their retailers to sell it at that price. Macy’s is fighting back by filling their stores with price-protected items, and their own private-label brands which aren’t found anywhere else.
Altogether, these aren’t necessarily bad things. Higher prices can leave more money for retailers to hire more skilled labor. Having to buy a new vacuum cleaner every three years because of cheap plastic parts stimulates the economy and the tax rolls. When I go to your yard sale, I’ll get to pick from more recently purchased items, rather than the stuff you bought 40 years ago that still works, but smells like mothballs.
Now if you’ll excuse me, I have an all-in-one clock/radio/golf tool/quesadilla maker to return. Happy New Year.
