If there was ever a year for America’s retailers like 2008, it must have happened a long, long time ago in an environment far, far away.
All up and down retailing, companies suffered from shell shock of a magnitude never before seen in a business lifetime.
It wasn’t just the drop in business: retailers have seen that before. But it was the suddenness in which it occurred, as if shoppers had decided en mass to stop consuming at a specific time on a specific date, generally conceded to be in October or November.
And it wasn’t just the inventory issues: retailers have seen that before too. But the amount of goods in process, combined with the tidal wave of merchandise being sold from going-out-of-business sales at several very large retailers, was unprecedented.
And it wasn’t just the impact of the implosion of the housing market: retailers have always ridden the roller coaster of housing. But it was the total annihilation of certain housing-related merchandise classifications—furniture of course, but also parts of lighting, major appliances and floor coverings—that most stores had never seen before.
Put it all together and it gives HFN’s exclusive ranking of the Top 100 Retailers in the country a decidedly red tint. Two-thirds of the group showed declining sales from 2007. And several names on the list—Linens ’n Things, Mervyns, Circuit City and Fortunoff specifically—were making their final appearances, some living on as rent-a-names only.
So, how did the winners keep their heads, not to mention their profits, on the right side of the ledger sheet and survive—indeed prosper—in a business environment of particularly cruel conditions?
In examining the results of the Top 100 data, several very clear strategies emerged to separate the winners from the losers:
1 Be Walmart.
It’s a strategy that only one retailer can claim, but if you happen to be that retailer, it was the ticket to success in 2008. No other operation in the country fed off the Great Recession the way Walmart did.
Its timing was impeccable in moving back from its ill-fated attempt to trade up, positioning the store perfectly to take advantage of the downturn. All those years of telling the consumer it had low prices paid off as shoppers went lemming-like to their nearest Walmart to buy food, household necessities and inexpensive clothing, stopping in the home aisles often enough to drive business.
Walmart’s gain was Target’s loss and after years and years of the former chasing the latter, the tables were turned and the hunted became the hunter.
2 Nearly as
Low Prices Always.
Walmart may have the perceived corner on low prices, but many other retailers used a similar strategy to ride out 2008, even if had a lot more to do with perception than reality.
The dollar stores as a class of trade generally had solid years and even if their numbers fell into negative territory, they never dropped as far and as fast as their counterparts in other channels.
On the other end of the spectrum were Costco and the warehouse clubs. Food, gas and commodities drove the top lines but the residual effects were felt in several home classifications. You may not need a quart jar of mayonnaise but the impulse instinct is stronger at the clubs than perhaps anywhere else in retailing. And the values are pretty decent too.
3 Off-price is better than just about
any other price.
If there was a single distribution channel that outperformed every other across-the board, it had to be the off-pricers such as the TJX group of stores and Ross Stores. You could go into virtually any strip center in America and if the power boxes and anchors were eerily quiet the off-price stores were booming. Again it was a value proposition that did the trick, even if the good stuff only went back a single waterfall fixture before you descended into a sea of forgotten, mystery brands.
4 Sell online.
Amazon is just about the only pure play on the Top 100 list, but you can bet if they were up nearly 30 percent then anybody who had any portion of their business online probably showed some impressive gains. Most retailers will tell you their online units remain the fastest growing parts of their business and unlike in previous years, they are registering that growth on larger and larger bases.
But as with nearly every rule, there is an exception. In this case it was Overstock.com, which had a dismal year in home.
5 Be a supermarket.
“Ya’ gotta’ eat,” was heard more often than ever as people cut back on their restaurant visits and ate more meals at home. That meant more trips to the local Kroger and while they were there, they picked up a new frying pan, a box fan, maybe even some chairs.
The trend extended to drug store chains which maintained their traffic even as shoppers abandoned other stores. And once again it was a case of coming in to fill a prescription and walking out with a new blender and a set of towels.
6 Be a specialty store... sometimes.
No class of trade turned in more erratic numbers than the big home specialty chains. Crate was up but Williams-Sonoma units were down. Urban Outfitters has double digit gains, Restoration Hardware double digit declines.
It didn’t seem to matter whether you had your retail act down or not. Pier 1 Imports, which has struggled with management and merchandising changes, was down, but so too was The Container Store, considered one of the steadiest retailers in the business.
Meanwhile, perennial outperformer Bed Bath and Beyond show positive numbers despite the meltdown of its arch rival Linens ’n Things which ran its going-out-of-business sales during the crucial holiday season.
7 Don’t be in the
The last and final way to have succeeded in 2008 was to be as far away from furniture as possible. Other segments of the home furnishings world may gripe and complain, but they are the chosen retailers compared to furniture stores.
Ashley HomeStores, which had been growing so fast so long that it didn’t even own any pens with red ink, dropped 15 percent off its top line. Such universally perceived well-run retailers as Ethan Allen and City Furniture turned in negative numbers. It didn’t much matter whether you played in the high end like Robb & Stuckey or the lower end like Badcock, you had an off year.
Again, there were a few exceptions. Raymour & Flanigan showed positive growth perhaps due to expansion. And the poster child for exceptions to the status quo of the furniture business—Ikea—kept its reputation alive with an up year.
The year 2008 was one most retailers would rather forget: the trouble is that 2009 has pretty much continued in a similar manner.
However this year has one big plus going for it that may make the numbers far less red and maybe even turn some into black: Stores are going up against some of the poorest year-over-year numbers in their histories and even flat business will make for some very happy anniversaries in 2009. Predictions of a late-year rebound are also a cause of hope for some retailers.
But as Rudyard Kipling himself might have said, that’s one big If.—Warren Shoulberg