Government officials take a very long view before declaring deflation exists (one year of a continued drop in prices). But it won't take that long before the country feels the pain of these lower prices with more layoffs, shorter work hours, or lower wages.
While everyone knows they are getting great bargains during the holidays, if prices continue to decline, how will businesses pay for their existing debt? And, if salaries fall because of deflation, employees' existing debt remains the same. Right now business has $11 trillion in debts. As prices fall, it will be hard to pay this debt out of smaller and smaller profits. The same is true for the homeowner whose salary falls, but the mortgage stays the same.
The Feds believe their infusion of dollars is one solution and I think everyone hopes that it will work. But for retail, the customer is the source of our recovery. If consumer confidence is restored, and people start to spend again, we will likely avert the deflation that is on everyone's mind and the concern over more retail store closures. True competition for customers is something retailers understand as long as there is a customer out there.
Governor Gregoire Releases Budget
Governor Gregoire released her budget late last week and has proposed numerous cuts in spending. She has not proposed any tax increases although that is not what other legislators are saying at this time. We do expect to see proposals for fees and tax increases, but they are not in the Governor's proposed budget. The Governor is required by law to have a budget ready before session starts. However, both the House and the Senate draft their own budget after session starts. It is based on the preferences of the legislators in each house. By the end of a long session, all three budgets will have been discussed and negotiated. The last time the state had a budget shortfall was under Governor Gary Locke. He also did not propose any tax increases and with the support of moderate Democrats and the Republicans in both Houses, the budget passed without tax increases. One concern that remains unknown is the true extent of a budget shortfall. Governor Gregoire based her budget on the current projected shortfall. The budget shortfall may be much higher by the next forecast, which will be done mid session.
Gregoire, meanwhile, won support for not proposing to raise taxes from Dick Davis, who is coordinating for the Washington Alliance for a Competitive Economy. Davis has been concerned that higher taxes on businesses will deepen the recession and lengthen the state's economic recovery.
"She was appropriately sensitive to what increasing costs on families and employers would do to prolong the recession," Davis said.
Gregoire's spending proposal, aimed at wiping out a $5.7 billion state revenue shortfall, calls for 12.2 percent spending cuts in human services and natural resources; wage and hiring freezes; a $500 million cut in health-care programs for children, the disabled and poor; and closing 13 state parks and seven fish hatcheries. The state's rainy day fund also will be tapped to make up the revenue shortfall in the 2009-2011 budget cycle.
The Legislature takes up the proposal when it begins meeting on January 12.
Remember the 80/20 Rule
80% of profits come from 20% of your customers 80% of your sales are generated by 20% of your sales force 80% of your time is spend dealing with 20% of your business 80% of your heartburn is created by 20% of your employees
A Christmas message from the staff at WRA
We hope that you enjoy the holiday and if you journey out, that you stay safe. While the snow causes us difficulties and our worries may seem like many, enjoy family and friends above all.
The economy is only one aspect of who we are as a society. Who we are as communities, as friends and as families is worth celebrating as often as the opportunity comes up.
Merry Christmas and Happy Holidays to everyone!
Storms curtail sales for retailers
Today's Puget Sound Business Journal included a wrapup regarding curtailed hours and hurt holidays sales from this week's snowstorms.
Many shopping center operators told the newspaper the storm could not have come at a worse time because the recession and a shorter holiday shopping season this year already had combined to result in the worst season in 40 years nationwide.
Jan Teague, President/CEO of the Washington Retail Association, commented in the article.
Teague said the bad weather might delay some Christmas shopping or prompt more shoppers to buy more gift cards for those on their lists. That could push more buying into the end of the year or into early January, she said.
"By the end of the year we still could see the same level of shopping we predicted," Teague said. "But the real question is will it be negative."
Her message to shoppers was to try to get out between the snowstorms and shop, but do it safely.
The National Retail Federation says that more people are waiting longer to start holiday shopping this year, likely because they are waiting for more discounting from retailers. Teague said the real question is how much the last-minute shoppers will wind up spending when they do get out and shop.
"That is still going to be the issue. I think the procrastinators will still have to get out, but how much less will they spend." she said.
Source: Puget Sound Business Journal
Employee theft growing
Employee theft as a percentage of total grocery store losses increased for the third year in a row last year. A new Food Marketing Institute study pegged employee theft at 40.7 percent of all grocery store merchandise losses last year.
Theft by criminals and employees accounts for a median 2.3 percent of grocery sales, FMI reports.
Three quarters of retailers selling gift cards report fraud. This could include tampering with bar codes to increase a card's value or buying the card with worthless checks or stolen credit cards.
About three-quarters of retailers are using various techniques to cut down on the problem. Methods include restricting the number of gift cards one can purchase as well as limiting the amount of money that can be charged to one card. Others limit the payment options for gift cards to prevent further fraud.
Source: Food Marketing Institute
Holiday shoppers waiting to spend
Many of the holiday shoppers who crowded malls last weekend were procrastinators, a new study has found.
According to the National Retail Federation survey of 4,117 shoppers done Dec. 16-18:
*20 percent of those surveyed had done no holiday shopping as of last week Friday.
*The average person had completed 64.7 percent of their shopping list heading into the weekend.
*Men and young adults ages 18 to 34 were the biggest procrastinators.
As of last week, U.S. foot traffic in retail stores was down nearly 18 percent from last year, according to ShopperTrak, and sales estimates were down 0.3 percent, although both were rising as Christmas and Hanukkah approach.
In a last-minute effort to attract shoppers, retailers are slashing prices, in some cases, selling below cost, said Helen Bulwick, managing director of New Market Retail Solutions. That means they have to sell more items to get close to last year's sales.
Retail "is as tough as I've ever seen it," Bulwick said. "Prices are as low as they've ever been. The economy fell off a cliff in October, and that's when inventories peaked for the holiday season."
Source: National Retail Federation
State climate change report available online
State officials unveiled a controversial proposal last week to reduce greenhouse gas emissions, but business leaders criticized it for being far short on details including estimates of its financial impact including on employment.
To read the report, look on the Department of Ecology's website. Fact sheets discussing the report are also available on the website.
Source: Department of Ecology
Employment scam reported
A computer scam is offering to file a person's claim for unemployment benefits for a $9.95 fee. It is free to file claims on the state Website, www.esd.wa.gov.
Unemployed workers must show evidence of searching for jobs to qualify for benefits. But if they mistype the jobs Website as "2worksource.com", they are taken to a Website that charges a filing fee to their credit cards, according to the South Sound Business Examiner.
Employment Security officials advise all job seekers to visit the secure Website, www.esd.wa.gov to apply for benefits.
New local crime show debuts
Safeway's loss prevention director, Jason Moulton, reports on a new local television show that could assist retailers in their efforts to combat organized retail theft.
"Washington's Most Wanted" airs Friday and Saturday evenings on Q13 Fox and MQ2, both in Seattle. The show is produced in cooperation with Crime Stoppers of Puget Sound.
To learn more about the show's reports and program schedules, click here.
Sources: Q13 FOX, Crime Stoppers of Puget Sound
WRA Website adds new features
If you haven't visited the Washington Retail Association's Website recently, please take another look.
We're putting more information onto the site more frequently as we near the next Legislative session. The quicker pace of additions to the site will continue through the next session and beyond.
A new right-hand column on the homepage now includes periodic video and audio updates on important issues, recent news developments of importance to retailers and several Internal Revenue Service business-related links to help retailers prepare for the upcoming tax season.
Our hope is that WRA members and the public at large will increasingly rely on the Website to keep abreast as issues related to retailers and their well-being surface or change.
And, of course, we invite your feedback and suggestions.
Please contact Jim Szymanski, Director of Public Affairs, with any thoughts you have regarding the additions to the site or further changes you believe might be useful. You can reach Jim either at 360-943-9198, Extension 12 or at jim.szymanski@retailassociation.org.
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.
