Desperate retailers seek holiday season rescue

This holiday season should prove especially interesting for astronomy
vendors and suppliers.

I wonder if we will see some companies close and mergers occur next
year after the holiday numbers are tallied?

TMT

Desperate retailers seek holiday season rescue
by Rob Lever Rob Lever
Sat Nov 21, 11:32 pm ET

WASHINGTON (AFP) – US retailers are taking desperate measures to spark
holiday sales in the face of what promises to be another troubled year-
end shopping season.

Merchants are furiously working to ramp up consumer interest ahead of
"Black Friday," on November 27, the day after the Thanksgiving Day
holiday that marks the traditional kickoff of the holiday gift season.

Some are promising price cuts of 50 percent or more on some hot
electronics, and planning for big events to bring out shoppers for big
sales promotions.

Analysts say retailers are struggling to find the right balance of
inventories and discounts while cautious consumers are hesitating
about how much and when to buy.

Clothing retailer Gap has started early with 25 percent discounts,
while Wal-Mart and Target are offering online shoppers free or
discounted shipping on many items. JC Penney is boosting Black Friday
promotions and will open its doors at 4 am for the best deals.

Steven Dennis, executive-in-residence at Southern Methodist
University's JC Penney Center for Retail Excellence, said price cuts
may be deep but are not as broad as some might expect.

"I think most retailers are desperate for market share," he said.
"Everyone seems to have the view that business is gong to be flat and
it is a battle for market share."

But Dennis said retailers are not in the dire position of last year,
when they had large amounts of inventory. So price cuts will mainly be
on a few high-profile items to get consumers into the store "and hope
they get a disproportionate share of their spending."

"I don't think deals will be so widespread."

Dennis said that with retailers focused on lean inventories, most will
be able to post profits even if sales are lower than in 2008.

Diane Swonk, chief economist at Mesirow Financial, said she sees
overall holiday retail sales growing 1.6 percent from last year, but
that this will essentially be flat when adjusted for inflation.

"The quality of spending this holiday season will still be dismal,
however, when compared to Christmases past," she said.

Swonk said retailers who don't join the heavy discounting "might be
disappointed with the results."

"Consumers were already playing chicken with retailers to get better
discounting ahead of the recession and there is no reason to believe
they won't be even more cautious about paying full price now, given
the sorry state of their balance sheets."

Scott Hoyt at Moody's Economy.com agrees the outlook is grim, with
unemployment running above 10 percent.

Retail spending "will look good compared with last year, but poor by
any other standard," Hoyt said.

"Though it will be the first nonrecession holiday shopping season in
three years, 2009 will again be trying for retailers," he added.

"In an effort to reduce discounting, retailers have cut inventories to
well below year-ago levels and are expected to keep them low through
the holiday season. If merchants have underestimated demand, they
could end up with bare shelves, losing sales."

Jon Ogg at 24/7 Wall Street said retailers are anxious ahead of Black
Friday -- which by tradition is the day in which merchants swing from
the red into profit for the first time in the year.

"This is the day that retailers look forward to all year and
critically depend upon as an anchor to how each retailer's full year
earnings results turn out," he said.

"What is amazing is just how much of the deal-making is already out
before the holiday season starts as retailers key off of each other.
It is almost impossible to avoid thinking how such a promotional
Christmas and holiday season in 2009 is going to add pressure to
margins at almost all of the first-line retailers."

A survey by Visa USA found consumers plan on spending 161 dollars less
on holiday shopping than last year and 368 dollars less than they
planned two years ago.

In one sign of the times, several retailers have brought back the
layaway plan, which enables customers to put down a deposit to hold
merchandise until the full amount can be paid. Sears, Kmart and Toys R
US are among those offering the plan, and a new online version of the
program is offered through eLayaway.com.

One reason for this is that consumers are stretched and may have less
acess to credit.

A survey for the National Retail Federation found 24.9 percent of
holiday shoppers will pay for gifts this year with cash, up from last
year?s 22.8 percent. Also, 42.5 percent of shoppers plan to pay
primarily with debit or check cards and those using credit cards is
expected to fall 10.1 percent.

"With many holiday shoppers focused on spending within their limits,
it's no surprise that fewer people will be relying on credit cards
this year," said Tracy Mullin, the NRF's president and chief
executive.

On Sun, 22 Nov 2009 07:34:38 -0800 (PST), Too_Many_Tools
wrote:

This holiday season should prove especially interesting for astronomy
vendors and suppliers.

I wonder if we will see some companies close and mergers occur next
year after the holiday numbers are tallied?

I find it interesting that quite a lot of small businesses (which
includes most astronomy vendors and manufacturers) are actually doing
reasonably well in this economy. Not generally peak business, but very
sustainable.

IMO, that is because small business can respond faster to change, can
successfully scale down when necessary, and often operates with a more
realistic economic model. The big companies described in the attached
story are the ones that don't have a sustainable business model. They
are too big, too unwieldy, and too badly managed. They are too dependent
on producing short term returns for their investors. Even a few percent
drop in sales is enough to drastically affect them.
_________________________________________________

Chris L Peterson
Cloudbait Observatory
http://www.cloudbait.com

On Nov 22, 10:30*am, Chris L Peterson wrote:
On Sun, 22 Nov 2009 07:34:38 -0800 (PST), Too_Many_Tools

wrote:
This holiday season should prove especially interesting for astronomy
vendors and suppliers.

I wonder if we will see some companies close and mergers occur next
year after the holiday numbers are tallied?

I find it interesting that quite a lot of small businesses (which
includes most astronomy vendors and manufacturers) are actually doing
reasonably well in this economy. Not generally peak business, but very
sustainable.

IMO, that is because small business can respond faster to change, can
successfully scale down when necessary, and often operates with a more
realistic economic model. The big companies described in the attached
story are the ones that don't have a sustainable business model. They
are too big, too unwieldy, and too badly managed. They are too dependent
on producing short term returns for their investors. Even a few percent
drop in sales is enough to drastically affect them.
_________________________________________________

Chris L Peterson
Cloudbait Observatoryhttp://www.cloudbait.com

Interesting comments Chris.

Do you have some stats that show this?

I have not looked but the concept makes sense.

I do expect a significant number of closures in the first quarter of
next year since I do not expect the holiday season to do well...my
guess worse than last year.

TMT

On Sun, 22 Nov 2009 10:27:13 -0800 (PST), Too_Many_Tools
wrote:

Interesting comments Chris.

Do you have some stats that show this?

No, my observations are largely anectodal. I operate a small business,
and I live in an area where most people operate their own businesses, or
work for them. While these folks I know have seen things slow down, it
isn't resulting in them going out of business. They have adapted.

From past posts and general observation, I think the smaller makers of
astronomical equipment are managing okay. I don't expect to see many (or
any) going out of business soon. It is the distributors, who don't make
anything themselves, who are probably most vulnerable. Distribution-
especially these days- doesn't add much value for either the
manufacturer or the customer; there's not so much money to be made
there, the margins are often slim, and the distributor has little
control over the product pricing. I wouldn't want to be in that business
right now!
_________________________________________________

Chris L Peterson
Cloudbait Observatory
http://www.cloudbait.com

Chris L Peterson:
From past posts and general observation, I think the smaller makers of
astronomical equipment are managing okay. I don't expect to see many (or
any) going out of business soon. It is the distributors, who don't make
anything themselves, who are probably most vulnerable. Distribution-
especially these days- doesn't add much value for either the
manufacturer or the customer; there's not so much money to be made
there, the margins are often slim, and the distributor has little
control over the product pricing. I wouldn't want to be in that business
right now!

Especially if you were Company 7. IMO they are a value-added reseller
because they don't drop-ship; everything comes to them and they unpack
it, test it, collimate if necessary, certify it, and re-pack before it
goes to the consumer. That requires skilled labor, and C7 has to try to
compete with the drop-shippers on price in a market where many people
know the price of everything and the value of nothing.

Fortunately, C7 does systems integration for customers with special
requirements, and that helps smooth the dips in the retail market --
though the specialty business has its own ups and downs that may
parallel those in the consumer market.

Disclaimer: Martin Cohen, owner of C7, is a personal friend. What I
have written here comes from personal observation. I buy from C7 at
their regular prices.

Davoud

--
I agree with almost everything that you have said and almost everything that
you will say in your entire life.

usenet *at* davidillig dawt cawm

On Sun, 22 Nov 2009 18:08:03 -0500, Davoud wrote:

Especially if you were Company 7. IMO they are a value-added reseller
because they don't drop-ship; everything comes to them and they unpack
it, test it, collimate if necessary, certify it, and re-pack before it
goes to the consumer.

Exactly. They have found a way to add value that people are willing to
pay for. Other distributors have, as well. But I think that most
distributors don't operate by that model, and that's going to make
things increasingly difficult for them.

Company 7 could provide a lesson to many distributors, but I think they
will remain more of an exception than the rule.
_________________________________________________

Chris L Peterson
Cloudbait Observatory
http://www.cloudbait.com

On Nov 22, 4:08*pm, Chris L Peterson wrote:
On Sun, 22 Nov 2009 10:27:13 -0800 (PST), Too_Many_Tools

wrote:
Interesting comments Chris.

Do you have some stats that show this?

No, my observations are largely anectodal. I operate a small business,
and I live in an area where most people operate their own businesses, or
work for them. While these folks I know have seen things slow down, it
isn't resulting in them going out of business. They have adapted.

From past posts and general observation, I think the smaller makers of
astronomical equipment are managing okay. I don't expect to see many (or
any) going out of business soon. It is the distributors, who don't make
anything themselves, who are probably most vulnerable. Distribution-
especially these days- doesn't add much value for either the
manufacturer or the customer; there's not so much money to be made
there, the margins are often slim, and the distributor has little
control over the product pricing. I wouldn't want to be in that business
right now!
_________________________________________________

Chris L Peterson
Cloudbait Observatoryhttp://www.cloudbait.com

The reason why I ask about data is that I am seeing the
opposite...small stores closing left and right and only large big box
stores remaining.

Since a large amount of astronomy equipment today is manufactured by
only a few companies, most of the names we deal with are
distributors..aka retailers.

Has anyone seen numbers of how small versus large retailers have done
this last year?


TMT

On Mon, 23 Nov 2009 08:22:22 -0800 (PST), Too_Many_Tools
wrote:

The reason why I ask about data is that I am seeing the
opposite...small stores closing left and right and only large big box
stores remaining.

I think we're probably looking at different things. The small business
people I know are not retailers, but are providers of goods or services.
I think those sorts of businesses are much more likely to weather bad
economic times than retailers.

I predict that most astronomical equipment designers and manufacturers
will survive; the thinning is likely to be amongst the distributors. The
distributors that will do okay will be those like Davoud identified,
which are able to provide some sort of value added service.
_________________________________________________

Chris L Peterson
Cloudbait Observatory
http://www.cloudbait.com

On Nov 23, 10:32*am, Chris L Peterson wrote:
On Mon, 23 Nov 2009 08:22:22 -0800 (PST), Too_Many_Tools
wrote:

The reason why I ask about data is that I am seeing the
opposite...small stores closing left and right and only large big box
stores remaining.

I think we're probably looking at different things. The small business
people I know are not retailers, but are providers of goods or services.
I think those sorts of businesses are much more likely to weather bad
economic times than retailers.

Yes: retailers have huge fixed expenses (rent) that they have very
limited options in cutting. Bad economic times are always very harsh
for small businesses in the retail sector.

John Savard

On Nov 22, 5:08*pm, Davoud wrote:
Chris L Peterson:

That requires skilled labor, and C7 has to try to
compete with the drop-shippers on price in a market where many people
know the price of everything and the value of nothing.


Davoud This is an extremely important concept and cannot be emphasized
enough. There are people who have the necessary skills and time that
they can fix QC problems without support. If you've figured enough of
your own mirrors it isn't difficult to tell if you have bad optics and
that they need to be returned, HOWEVER, and this is a very big
qualifier most people buying a "premium" mass produced scope don't
have the request skills. These people should be buying from Company-7
or other reputable dealer who can look/test the scope before the
consumer gets it. Unfortunately few people understand the price of an
item and it value.