Considering most retailers bottom line is about 2-5% of sales, an 8% drop would wipe most out. When you factor in store expansions and inflation (of around 4-5%), that is a very, very bad #. I take it you’ve never worked in retail before?
Very briefly. In 2005, I worked for Sears. In the early morning hours, I would change signs advertising 40% off of a ridiculous "nobody would pay that much" retail price, and put up signs offering 50% of that price. A few days later, I'd go out and replace the 40% signs. It occurred to me pretty quickly that if we got rid of my department, and all the signs and the flyers sent out in newspapers, we could just sell the crap for 60% off of that inflated retail price, and make more money in the process.
But no, Sears has to play some little mind game with the shopping public, to pretend that they're getting some fantastic deal. I guess I developed a bit of counter-contempt for retailers in the process.
It doesn't matter, in ten years, most of what you and I will buy in the non-perishable goods arena will likely be online. Even clothing.
“Considering most retailers bottom line is about 2-5% of sales, an 8% drop would wipe most out.”
Ah-—No! 5% of 8% is only .4%, and if they are working on a smaller margin, the differenc is even less. It only means there will be a smaller gross—the profit (percent-wise) on the gross will be the same, but the net profit will be smaller, but only by the percentage the gross is decreased.
No wonder B. Madoff was such a success—for a while.
Hank