Retail Forecast for 2011: Better Sales, but Also Tough Times
2011 will be a year of recovery, but many economists and analysts are trying to determine how good the recovery will be.
For retailers, the strength of the recovery will be based on employment figures, said Nancy Sidhu, chief economist for the Los Angeles County Economic Development Corp. The outlook is brighter than last year, according to the economist. “We’ll see more job growth than we did last year. There will be more people with jobs, and employers will be more likely to give raises. People will have more income to spend,” Sidhu said.
Sidhu based her forecast on California’s Employment Development Department statistics, which have been gradually trending upward. The state added 22,400 jobs in information, professional, business services, education, leisure and health-services fields, according to an EDD report released Dec. 17.
Orange County’s Chapman University also predicted job growth in 2011, but it will be slow. According to a Chapman forecast released last month, the employment rate is expected to grow 1.9 percent. The jobs rate was estimated to have declined in 2010, said Raymond Sfeir, a Chapman economics professor.
Slow growth will impact retail, Sfeir said. “1.2 percent is not very high. If employment improves slowly, retail sales will be sluggish, too,” he said.
Retailer Gila Leibovitch said weather and tourism will play big roles in the 2011 success of her stores, which include Premier Men and Premier Kids in the Beverly Center mall in Los Angeles and Vault Women, Vault Men and Melrose Place in Laguna Beach, Calif.
“A lot of the mall business depends on weather, so if our weather continues to be cold and rainy, then we can expect better business,” she said. The LAEDC forecasted increases in tourism in 2011, and Leibovitch said increased crowds of tourists will also lift her boutiques’ businesses during summer.Eye on the price tag
Inflationary pressure and price increases in doing business—whether it be higher cotton prices, higher overseas labor costs or higher shipping costs—will have a serious impact on the business of 2011, according to a research paper published by the International Council of Shopping Centers in December. The paper forecasted that “core inflation is expected to run about 1 percent faster than in 2010.”
Retailers will have to figure out how they will navigate a market governed by higher prices, said Jeff Van Sinderen, a retail analyst for Los Angeles–based financial-services firm B. Riley & Co.
“The biggest question of 2011 is what will happen with pricing. How much price increases will be passed on to the consumer? We do not know how the consumer will absorb these higher prices, how much will go back to vendors and how it will take a bite out of [retailers’] margins,” Van Sinderen said.
Mercedes Gonzalez, director of New York–based buying office Global Purchasing Companies, is advising her clientele of retailers not to worry too much over 2011’s forecasted price increases. Consumers will absorb price increases if the quality of a product is good.
“Give consumer value and price does not matter,” Gonzalez said. “People are willing to pay for quality, newness and fashion. It has to be worth it.”
Price increases have not yet affected the boutique retailers. Retailer Reneeacute; Tenison said cotton prices have not become a burden as she wraps up buying for the Spring 2011 season, which includes quite a bit of cotton clothing. “We’re still buying cotton. It’s still doable,” said Tenison, who serves as co-chief executive with her sister Rosie of four Varga stores in Los Angeles and Orange counties. (An e-commerce website at www.varga.com debuts later this month.) The Tenison sisters have been buying cotton tops ranging in wholesale price from $8 to $12 for their stores. (For a related story on cotton prices, click here.)
The real tenor of 2011 business may not be revealed until February, when the 2010 Christmas season’s gift-card business wraps up, Van Sinderen said. “2011 will be less bumpy than 2010, but it will not be smooth. We’re not going back to the days of 2005 and 2006, but it is getting better,” he said.
