Estimates for 2012 are all over the map, and most are cloaked in a waning degree of confidence. How good will your 2012 be? It’s directly related to your sales performance right now. The following is one of a series of quick posts to help local sales teams get a jumpstart on the competition … right now.
There’s been a buzz in the retail world for the past couple of weeks. A record-setting Black Friday followed by an equally strong Cyber Monday has retailers cautiously optimistic about 2012. According to AdAge, 68% of retailers expect holiday sales to be at least 15% stronger than in 2010.
Appears to be good news, right? Or is it?
The fact that two-thirds of retailers will have double-digit gains — if they do get there — isn’t a bad thing. But look a little closer at how they are going about accomplishing that. Marketing expenses were extraordinarily high leading up to Black Friday, and many retailers borrowed forward-equity (future sales) by offering unprecedented deep discounts. So, while retail sales were a big positive, margins are eroding.
We need not look too far into the past to see similar patterns.
In 2010, energy credits significantly bolstered the home services and replacement industry, a huge revenue source for local media entities. Homeowners scrambled to replace inefficient fixtures, knowing Uncle Sam had their back for a limited time. Many HVAC, window replacement, and other companies are still wondering how many customers the effort yanked from 2011 into 2010.
In 2009, it was cash-for-clunkers. The verdict was — as you might have guessed by now — we merely borrowed automotive sales that were about to happen anyway. If you want the real scoop on cash-for-clunkers, just ask a car dealer. The U.S. auto industry is finally showing signs of legitimate recovery, as November 2011 provided the most units sold since the days of clunkers.
In 2008, we also had a stronger-than-expected Black Friday, marked by similar deep discounts and shopper frenzy. We all know how 2008 ended.
It’s not difficult to see a pattern of borrowing money from the future. Who said “Those that don’t learn from history are doomed to repeat it?” (It was George Santayana, and I paraphrased a bit.)
So I guess this is bad news then. Right?
The good news is that retail is still alive and kicking, but is in need of a legitimate plan. A real plan that delivers consistent performance while preserving margins. One that speaks to an obviously value-centric consumer, and does so with media cost efficiencies built-in.
THE LESSON: Anticipate the upcoming struggles of retailers awaiting us in 2012. Build the dialogue now. Don’t wait until sales soften again! They might be busy in the midst of another crazy holiday season, but they’ll need — and will appreciate — your help very soon.
Dave Eckstein is a Partner in the firm ESA & Company. He specializes in highly profitable market share growth for local businesses and gets a kick out of demonstrating a declining cost of customer acquisition. He plays baseball, but isn't that Dave Eckstein.