Future trends in retail By Jan Teague, President/CEO
I am often asked what is coming down the road for retail? Will retail ever see the bubble it once enjoyed in retail sales?
Last week I reported on the fact that consumers are saving more now and spending less and that the recession is hitting certain types of retailers much harder because so many retailers sell to new home buyers. But what is next? What will happen as the recovery starts to take place?
Larger retailers are in the paper daily with reports on how they plan to retool and focus on their core customer base. This is a sign of continued development of specialization. For example, ever heard of the store Black & White? That's all they sell, black & white clothes. Many of these large retail companies have multiple storefronts under different names, creating a focused shopping experience so that customers who like a certain style or brand can have a larger selection of certain styles they like to wear.
Marketers have known for the past decade that if a customer wears a certain style, they will likely shop in that area of the store more often. The stores that try to be all things to all kinds of shoppers have had a more difficult time. While discount shopping is all the rage and is now a fashion statement, will it last? If fashion continues to be important it could increase the pace at which it changes. The challenge for larger retailers will be to move more product faster from the store to the consumer and to make sure the consumer knows that new product is being introduced more than once a season.
Getting consumers into the stores on a more frequent basis will be the key. In this regard, many stores now call their regular customers offering unique experiences such as a personalized fashion show or sneak preview of items before they go on the shelf. So a faster pace of changing fashion and personalized services will become a larger part of the retail shopping experience for consumers looking for entertainment and excitement in our predominantly consumption-based society.
But the small business struggle continues. Cash flow is the biggest challenge right now. Banks have reduced critical lines of credit that are the lifeline of small retailers who order seasonal product in advance of seasons such as back-to-school and Christmas, the two biggest sales seasons of the year. These retailers are ordering less because it's the most they can buy, and they hope to sell their products during the season rather than at deep discounts at the end of the season. For consumers in small cities this will mean less merchandise on the shelf in some of their favorite local stores and less discounted merchandise.
Keep in mind that of the 281 cities in Washington State, 167 have populations under 5,000. Small retailers in these small towns will continue to find it difficult to stay in business. Consumers may have to drive farther for some of their basic supplies over the next decade.
There is more retail space available which is creating opportunities for franchise retailers. For the past decade between 180 and 270 new franchise brands have developed each year creating an estimated 900,000 different franchises. Many are service based such as furniture repair, estate planning, energy conservation, and dry cleaning. But just as many are retail such as home & garden, 7-11, and restaurants. These small retail businesses are stable, offering the protection of guidelines the small business must follow in order to protect the integrity and goodwill of the trademark. They also supply 10 million jobs in retail. There is speculation that this market segment that can seize an opportunity with more agility than large companies will see its biggest growth in the future. This translates into these entrepreneurs becoming a larger part of the next decade of small retailers.
What constitutes retail is also changing. Would you consider a bank a retailer? You probably would not in the traditional sense. But selling services continues to take on a retail look. Companies that sell food are retail; why not those that sell other products such as checking accounts? We have already begun to see businesses that sell educational training and health care start to show up in malls. Instead of walking out with a pair of pants, people walk out with knowledge or a prescription from the doctor. Malls of the future will be a more blended mix of general retail, franchise retail, and retail professional services.
I have one last thought today on the future of retail. Ever go into one of those antique malls that have sprung up in the last decade? What's interesting is that they are mini retailers who don't even have to be present to sell. They work like a business incubator where a number of companies share a clerk or share a single rented space. This is a trend to watch. In larger stores, they have been selling space for a number of years to smaller retailers. They sell optical space, maybe they sell pharmacy space, or perfume space, or jewelry space. Go to a gas station and you might see a pizza parlor or a sandwich shop right in the gas station.
As retailers continue to look for ways to create a stable income stream, renting part of their space to a complementary service or brand that doesn't compete directly with them could be a winning formula for survival. People like efficiency when they are in a hurry. Maybe the next thing we might see is more vendor style retailers selling hotdogs, sunglasses, or umbrellas in the parking lots where coffee baristas have flourished in the past decade.
Are penalties too lax for pharmacy robberies?
WRA Vice President of Government Affairs Mark Johnson attended the Washington State Board of Pharmacy meeting July 30. Two presentations were made regarding the increase in pharmacy robberies in Washington State.
Washington is on pace to total more than 100 pharmacy robberies in 2009. This is by far the largest number in the country.
The first presenter was Carole Watson-Stover, Regional Loss Prevention Manager for Walgreens. She said that most robbers are after prescription pain relievers in order to feed their drug addiction. Most of the robberies are committed by individuals, not organized retail theft rings, as is the case for other products, she said.
Walgreens is a leader in deploying new, sophisticated pharmacy theft deterrents. Watson-Stover theorized that the reason Washington has more thefts than other states is that our sentencing guidelines are not as strict for these type of crimes as other states.
The next presentation was by the U.S. Drug Enforcement Agency. DEA officials, too, have seen a huge increase in the number of robberies of pharmacies. More such robberies are being committed with a weapon, thus putting customers, pharmacists, and other employees in danger. Often, a robber commits multiple crimes before being caught and arrested. The DEA is increasing its partnering with retailers and law enforcement.
After hearing the presentations, the Pharmacy Board approved a motion asking its chairman to communicate directly with the Governor about the problem and to seek solutions.
"Something needs to be done to curb these crimes for the safety of our customers and employees. If our laws are not strict enough to serve as a deterrent perhaps we should consider increasing the penalties." Johnson said.
"Furthermore, a healthy dialogue and sharing of information between retailers, legislators, law enforcement, prosecutors, and other stakeholders should help to crack down on these and other crimes," Johnson said. "I am particularly encouraged that the 2009 Legislature formed an organized retail crime task force to specifically look at the issue of retail theft. The WRA looks forward to being an active participant with the task force."
Rising workers comp costs call for legislative reform
Expected increases in workers' compensation insurance rates next year are raising awareness to consider changes in the law during the 2010 Legislative session, said Tammie Hetrick, WRA's Vice President of Retail Services.
Rate increases to employers of up to 20 percent are expected next year, according to a recent report in the Puget Sound Business Journal. Two key reasons include lost premium payments to the state by businesses closing during the recession and longer and more expensive lost-time claims, Hetrick said.
"There is a big need for reform of the workers' compensation system," Hetrick said. "Double digit percentage rate increases really bring out that awareness."
Hetrick has been meeting regularly with business leaders in a Workers' Compensation Coalition, where the subject of increased insurance rates has been discussed.
Labor and Industries Department officials are expected to make an announcement about next year's workers' compensation insurance rates in September.
One change in law the Legislature should consider would be to allow for some form of settlement on claims. Washington is the only state in which an injured worker lacks the right to settle a workers' comp claim for a financial settlement.
"We are very benefit rich in Washington," Hetrick said. "There are cases where workers are getting paid more in lost-time benefits than they would net in their paychecks."
Fixing these problems could bring balance back to our system, Hetrick said.
Washington State imposes heavy tax burdens, report shows
Washington ranked last nationally in a recent U.S. survey of how state tax laws affect economic performance.
Washington finished last in the "sales tax index" category compiled by The Tax Foundation, a nonpartisan Washington, D.C. tax research group founded in 1937.
"WRA and its members are concerned about adding to the state's already high tax burden, particularly during a recession," said Jan Teague, President/CEO of the Washington Retail Association. "Our elected leaders need to prioritize spending rather than raise taxes lest they stifle any signs of recovery."
The sales tax index measures not only the tax rate but the complexity of tax laws that make collecting the tax more burdensome for businesses, including retailers, said Mark Robyn, an economist with The Tax Foundation.
Several parts of the foundation's mid-year tax update showed Washington's tax burdens are heavy in several categories.
For example:
* The tax burden on individuals in Washington is proportionately heavier than the state's relative position on income. For example, state revenues per capita, at $7,324, rank 19th nationally, according to 2007 Census Bureau data. But the state's tax collections per capita, at $2,755, rank 13th highest in the nation in 2007.
*The state's general per capita tax collections in 2007 were $1,691, the nation's second highest amount, according to 2007 Census data.
*The state's 37.5-cent gasoline tax rate was the nation's third highest as of April of this year.
Oregon is the nation's first state to launch a manufacturer-financed program to recapture and safely dispose of unused oil-based and latex paints. The law applies to paints used for interiors and exteriors and sold in containers of five gallons or less.
The law, signed in July by Gov. Ted Kulongoski, requires manufacturers to start a pilot program for free disposal of unused paints by July 1 of next year. The cost for the program will be passed on to consumers in the price of the paint.
Product Stewardship Institute literature related to the Oregon law reports that 10 percent of the architectural paint sold annually in the U.S. is unused.
The Washington Retail Association favors product stewardship and recycling and played an important role in establishing Washington's electronic recycling law that provides consumers with free disposal of computer, monitors, laptops and televisions. WRA, however, opposes imposing recovery fees for recycling or requiring retailers to take back products or spend money to post signs related to the program or to add to their product labeling.
Oregon's Metro regional government is expected to play a major role in collecting and recycling the leftover paint. MetroPaint, operated by Metro since 1992, each year turns leftover latex paint into about 120,000gallons of recycled latex paint, which it sells to consumers and painting contractors for between $6 and $10 per gallon.
Source: Product Stewardship Institute
WRA encourages review of new WPC health care videos
WRA has partnered with the Washington Policy Center on several issues over the years, including health care and possible reform attempts.
As part of this partnership, WPC has produced three videos related to the current health care reform debate in Congress.
"WRA has partnered with WPC for several years on important issues such as health care," said Mark Johnson, WRA's Vice President of Government Affairs. "We have found the WPC does a thorough, fair and balanced job on the issues it researches and reports on. I encourage you to take a look at their clips on health care."
WRA was a co-presenter of a health care conference the policy center held earlier this year.
Now, the policy center has released three videos it produced on the subject of health care reform. Leading the project is Roger Stark, the policy center's Health Care Policy analyst. Stark is a retired surgeon and has authored a book on problems and solutions for the current health care market.
The three videos cover the problems in the current health care system, plans to change and solutions. To view the videos, click on The Problem, The Plan, and The Solution.
The Washington Retail Association opposes current efforts to establish a government-run health care program, but supports efforts to reduce the rising cost of health care. WRA supports identifying efficiencies in the health care system, such as the use of electronic medical records, but opposes any mandate that would force businesses to provide health care for the uninsured.
WRA instead urges our decisionmakers to work on promoting competition to better manage the cost of health care.
Ecology seeks answers in Children's Safe Products Act rulemaking
The Department of Ecology is seeking feedback from retailers in its rulemaking process to implement the Children's Safe Products Act.
The department is working on reporting requirements under the act, passed in 2008 and designed to reduce the levels of certain chemicals in toys and other products.
If you are a retailer that sells children's products, we would appreciate your participation.
You may submit your answers to Mark Johnson, WRA's Vice President of Government Affairs, by Aug. 17, at mark.johnson@retailassociation.org.
They then will go to Ecology to continue its rulemaking process.
Another poll shows Seattle shopping bag tax headed for defeat
A second poll in two weeks indicates voters will defeat a proposed Seattle tax on plastic and paper shopping bags.
The issue is scheduled on the Aug. 18 Seattle ballot.
A PEMCO Insurance poll released last week found that 71 percent of those surveyed either strong opposed or slightly opposed paying the proposed 20-cent per bag tax. City officials are attempting to encourage use of reusable shopping bags.
If the tax were reduced to 5 cents, 54 percent said they were strongly or at least slightly opposed to the idea.
Earlier last month, a KING5/Survey USA polled showed 51 percent of Seattle votes opposed the tax.
The Washington Retail Association favors recycling the shopping bags on several grounds. Recycling preserves choices for shoppers, avoids financially penalizing shoppers of modest means and eliminates the threat that consumers would avoid Seattle stores to escape the tax.
In a related matter, a Washington Policy Center analysis concluded that a shopping bag tax would have a negligible impact on Seattle's garbage. It would reduce the city's waste stream by .0014 percent, according to the policy center study.
Sources: Puget Sound Business Journal, seattlepi.com
Now is the time to take the swine flu threat seriously
Public health officials have an enormous task ahead, preparing for the 2009-10 flu season.
The Centers for Disease Control and Prevention predict that the swine flu, which was first identified last April, could strike with a vengeance in the 2009-10 flu season.
The center's warning resonated two weeks ago with the WRA's safety advisor, Patti Vernie, whose 17-year-old son, Matt, caught swine flu at a camp for cross country runners. Vernie took her son to Mason General Hospital in Shelton, where the diagnosis was made.
"They have been seeing cases already in the area," Vernie said of the hospital staff. "We were given prescriptions and told to stay away from people for seven days. I bought face masks and Lysol spray and wipes. He wasn't allowed to come near the rest of the family without his mask."
Vernie's son has fully recovered and the illness did not spread to family members, But her warning is for businesses to educate their employees on the steps they need to take to avoid catching the illness.
"If a small business were to contract this flu, it could easily close them down until everyone was well," Vernie said.
As much as 40 percent of the United States population could get swine flu this year, according to CDC estimates released in late July. Without an aggressive and thorough vaccine campaign, anywhere from 90,000 to several hundred thousand Americans could die.
In a typical flu season, about 36,000 people in the United States die from the flu or complications, according to the American Medical Association.
The CDC and other health professional stress the same steps to avoid swine flu or how to react after someone gets it:
*Regular hand washing and covering coughs.
*Keeping a distance of three to six feet from people showing symptoms of the flu.
*Someone diagnosed with swine flu should stay away from their job until they recover.
Summer usually isn't a time when people are thinking about flu. But think again: The 2009-10 flu season could be disastrous without a concerted preparation effort by the federal, state and local public health communities, and the public they serve.
The 13th Washington Small Business Fair is scheduled on September 12 at Renton Technical College.
The free event aims to assist new and existing small businesses to grow and survive the recession.
The fair requires no pre-registration. Speakers will be unpaid and no private vendors or selling will be allowed during the event.
Seminars range from understanding taxes to business planning and from marketing to starting a Website. A list of exhibitors is expected to be posted at the fair's Website, www.bizfair.org, early in July. You can also visit the site for directions to the college and updates about the fair.
The Washington Retail Association participates on a planning committee and will exhibit at the fair. There is no single fair sponsor but organizations such as the Internal Revenue Service, Small Business Administration and various state government departments participate in the planning.
About 50 exhibitors participate annually at the fair, attended by up to 1,000 visitors. Business networking is encouraged during the event.
The Washington Retail Association, WRA, is a 501 C 6 trade association formed to advocate for Washington State’s retailers at the local, state and national level. Since 1987, the WRA has protected Washington's retailers from unreasonable taxes, fees, regulations and legislation. The efforts of the WRA benefit all Washington state retailers and help fuel statewide economic growth.
