NEW YORK, Jan. 18, 2011 /PRNewswire/ -- While the majority
of publicly traded retailers were able to capture share in 2010
from smaller competitors or those that were forced to declare
bankruptcy, and also increase profit margins, retail analysts at
S&P Equity Research see 2011 as another good year and are
projecting that consumer spending will rise 3% this year.
"The most important driver of retail sales is the trend in the
labor market, and we think the employment situation will continue
to stabilize with some slight improvement," said Marie Driscoll, Group Head of the Consumer
Discretionary Retail analysts at S&P Equity Research. "We think
this will be a slight positive for retail sales this year, although
we admit that various aspects of the labor market are still
extremely poor."
"Perhaps the biggest catalyst for improving retail sales in 2011
will be the extension of the Bush Era tax cuts and the 2% payroll
tax cut for all workers one year, said Driscoll.. "We think this
'tax holiday' will have a significant impact on spending, as the
median income family earning about $50,000 per year will receive an additional
$1,000 in its paychecks and those
earning $106,800, the current limit
of FICA taxes, and above will take home about $2,100 more this year."
The analysts have identified the following ten trends for
retailers in 2011 and the medium-term future.
1. Retailers such as Abercrombie & Fitch (ANF 52 ****), Polo
Ralph Lauren (RL 110 *****), and Tiffany (TIF 60 ****) plan to
increasingly focus on international markets (in particular,
emerging markets) to boost growth rates. On that same note, we
expect opportunistic domestic store closures for many
retailers.
2. We project aggregate online retail growth of 10% in 2011, as
consumers increasingly migrate to online sites for convenience and
value. It seems apparent to us that consumers are becoming more
channel agnostic, with retailers such as Amazon.com (AMZN 189 ***)
likely to gain additional market share.
3. We expect m-commerce to become more common, as demands by
consumers to price comparison shop prompt retailers to enable Wi-Fi
hot spots in their stores. It is estimated that about 50% of
consumers will have smartphones by the end of 2011. In addition, we
think that sales clerks, like consumers, will also be empowered by
greater access to information.
4. Companies will likely rely more on social media, not only by
responding to consumer complaints, but also to market products and
unveil promotions. This should be an effective way for companies
like Coach (COH 54 *****) and Urban Outfitters (URBN 36 ****) to
manage their image and brands.
5. We expect consumers to increasingly seek out organic or green
products that are better for the environment, but not at the cost
of foregoing fashion. We think retailers like VF Corp (VFC 84
*****) are at the forefront of this trend.
6. Retailers will likely increasingly cater to (and meet)
individual consumer demands by providing greater service and
marketing. We think this will be accomplished through the use of
computer algorithms to analyze past shopping activity. My Macy's is a great example of this, as Macy's
(M 23 ****) now individualizes 1,000 mailings to its customers.
7. We expect continued bifurcation of the retail market with
high-end luxury stores benefiting from the wealth effect and
low-end stores being aided by value-seeking consumers.
8. Consumers are always seeking new and exciting experiences.
Retailers that are able to thrill, surprise, delight, and engage,
will probably win, in our view. Destination stores such as those
from Disney (DIS 39 ****) and Apple (AAPL 348 *****) are
increasingly becoming a source of additional entertainment for
consumers.
9. We expect retailers and brands to test the waters of mass
collaboration, providing the consumer community input in product
design. This further engages the consumer, and brings about a whole
new meaning to the word "personalization".
10. Coupons are fast becoming ubiquitous through increased
connectivity. Be it online or on their mobile phones, more and more
consumers are searching for coupons as a means for creating value
from their purchase. "Caveat emptor" could become "mercator emptor"
given consumers' newfound and increasing knowledge base, with
retailer margins likely to decline as a result.
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