Sunday, December 19, 2010

Bad signs at the mall

AP says that shopping is better than this year than last. (Certainly it’s better than the England, where unfamiliar snowstorms are preventing stores from restocking.)

We ran out to the major Santa Clara mall this afternoon to buy a couple of items, and what I saw was signs that retailers were desperately discounting because traffic was lower than expected. Bath and Body Works had a number of 50% discounts and pretty much everything seemed to be 25-33% off. Abercrombie sold my tween a sweatshirt for 10% less than what we were charged on the morning of Black Friday — usually the day of deepest discounts.

Perhaps this was just the stores we went to — one for silly luxuries, one for stylish teen clothing. Other stores selling more basic goods could be doing great. Or it could be the Bay Area, or California more generally. After all, our statewide unemployment rate is 12.4%, or one-fourth higher than the 9.8% national figure.

In any event, this data is dissonant with the all-smiles-and-cheer view being presented by retailers.

A final possibility is that retailers underestimated how quickly demand would shift to online stores — which, as the WSJ notes, can now be consulted by smartphone-wielding shoppers as they stroll down the aisles. Given Silicon Valley has always had the highest penetration of e-commerce awareness and now has a relatively high smartphone penetration, this could explain the local desperation. After all, distribution is just another service that’s been commoditized by the Internet.

If I’m right, luxuries/frills/non-necessities will be heavily discounted on Dec. 26 — a great bonanza for those who have birthdays in January (or are willing to exchange gifts on Twelfth Night.)

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