A new economic report this week warns that specialty retailers are likely to start tanking once the stimulus checks are spent.
Photo: *hoodrat*, Creative Commons, Flickr
According to Business Week, the outlook isn’t good for retailers who fill niche markets. One-note retailers like Sharper Image, an online supplier of fantastically expensive air cleaners, and Linens ‘n Things, a seller devoted almost entirely to bedding, bath towels and kitchen kitsch, are facing the prospect of bankruptcy. The two retailers mentioned above have already filed.
Personally, I feel it is karma when a seller devoted entirely to marketing Saran shoes, for example, finds itself on hard times. (By plastic shoes, I mean those see-through monstrosities made of PVC with plasticizers for flexibility that show every wart, bunion and crooked toe in lurid detail. The foot may be the sexiest part of the female anatomy in some male minds, but appeal declines in direct proportion to age – a fact many women choose to ignore.)
American women don’t need plastic shoes. Nor do Chinese women need to work in stinking factories making them, absorbing toxic chemicals into their lungs and bloodstreams. The same DEHA used in making the shoes is also found in plastic water bottles, and even though the scientifically “bent” EPA has since delisted DEHA as a carcinogen, the environmental community recognizes this as a ploy to: A. protect the EPA’s butt for failing to do the science in a timely manner; B, protect the oil companies and their profits (plastic is made from petroleum); and C, protect the lucrative “Chinese connection”, whose balance of trade supports the U.S. dollar.
The failure of plastic shoes, and other gimmicky fads designed to enrich a few at the expense of the many, means that the survival of the fittest even works in economic theory during crunch time, and crunch time itself is an economic tool to weed the flamboyantly irrelevant from the merely useful. Instead of mourning the current meltdown, socially conscious consumers should reflect on how future consumer product ideas may revolve around better mouse traps and not insanely expensive artificial mouse-fur gloves, or pet rocks, or whatever.
Business Week goes on to report declines in sales from such high-end, specialty retailers as Limited Brands (Victoria’s Secret, Bath and Body Works, LTD – $17.26) and Foot Locker (FL – $14.71). Low-end, broad-based retailers, whose business model is founded in diversity and affordability, are faring much better. BJ’s Wholesale Club (BJ – $36.71), in particular, is experiencing growth of around 15 percent month-over-month.
Perhaps when the economy shakes out, in six to 12 months, the surviving retailers will realize that catering to an economic demographic (like the wealthy) or a fashion demographic, like twenty-somethings, is a poor business policy dependent on a narrow and relatively fragile spectrum to achieve profit. If diversification is good for big business, it is equally good for small business, enabling players to survive downturns. The rich are the first to turn off the tap in bad times, and young people are largely dependent on their (now economically challenged) parents for disposable income. Neither represents a safe haven for retailers in a crisis.
My advice to future entrepreneurs: sell plastic shoes, but also sell canvas deck shoes, walking shoes and work boots. Sell Salad Shooters, but don’t forget the paring knives and saucepans. Sell based on price points, but don’t forget the low end of the demand curve, where many shop even if few can be considered "chosen."
Disclosure: I don’t own stock in any of the retailers mentioned.