The Other Shoe Drops: Retail Sales Fall Flat
Business + Economy

The Other Shoe Drops: Retail Sales Fall Flat

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Fashion Week in New York wrapped up yesterday, but maybe they should rename it Fashion Weak because the rag trade – and retail in general -- isn’t really rocking. There are exceptions, of course, as the jostling at Target to snag cut-rate Missoni-labeled clothes made plain. And some retailers – or maybe one named Patagonia – apparently don’t give a sensible, sustainably produced pullover if they make a buck.

Shoppers Are Just Browsing
We already knew that August saw zero net job growth, but new data released by the Commerce Department on Wednesday offered another indication that the economy may be stalling: Consumer spending was virtually unchanged last month compared with July as waning confidence translated to less ringing at cash registers. Shoppers shelled out a seasonally adjusted $389.50 billion, up only slightly from $389.34 billion in July, but spent less on cars, clothes, and furniture than they had the previous month.

A revised read on July retail sales growth, at 0.3 percent, was also slightly weaker than the original estimate of 0.5 percent. Despite the month-to-month weakness—which may be due in part to the disruptions caused by Hurricane Irene—August sales were 7.2 percent higher than they had been in 2010.
Missoni Accomplished at Target
When is a crash actually a boom? Target’s website crashed on Tuesday due to what the retailer called “unprecedented” demand from frenzied fashionistas eager to snap up a limited line of clothing and home goods from Italian designer Missoni. Target has plenty of experience with such partnerships, having done similar promotions with designers and brands such as Michael Graves, Zac Posen, and Liberty of London, but as popular as some of those prior offerings were, none was met with the quite same tidal wave of demand. By 8:22 a.m. on Tuesday, Target’s Twitter feed had turned into a string of apologies—“Sorry for the inconvenience! Our new clothing line launch has caused some higher traffic than usual. Please check back later!”—to frustrated consumers who had been sounding off online. Shoppers also descended on Target stores and cleared out everything from socks and skirts to umbrellas and picture frames, all bearing Missoni’s signature zigzag pattern. The cheap chic line, which was officially supposed to be available through October 22, was mostly sold out in less than a day. By mid-day Thursday, nearly 42,000 Target Missoni items were listed for sale on eBay

While Target has taken some knocks for its handling of the promotion, the mayhem could still turn out to be a marketing win for both the retailer and Missoni. “It was brilliant,” says Kendra Wehmeyer of branding consultancy Landor Associates. The tumult certainly could help both the Target and Missoni brands, Wehmeyer says. “The fact that the website crashed was amazing. It just created this pent-up demand that will continue.” And by Thursday, Target’s Twitter feed had a new message for those frustrated customers: “Limited Missoni for Target items will be restocked by the end of the week!”

Best Buy Earnings: Now 30 Percent Off!
The big-box electronics chain has some big issues to sort through. Best Buy on Tuesday reported disappointing earnings for its fiscal second quarter, with operating income off 30 percent to $177 million and revenue essentially flat at $11.3 billion. Sales at stores open at least 14 months dropped 2.8 percent, marking the fifth straight quarterly decline. CEO Brian Dunn said the results “reflect continued macro challenges to overall consumer spending and lower consumer electronics industry sales.” And despite sounding optimistic notes regarding the coming holiday shopping season, the company cut its forecast for full-year earnings. Best Buy stock, which has short-circuited this year, fell an additional 6.5 percent on Tuesday, hitting its lowest level since December 2008 before rebounding slightly on Wednesday.

Patagonia to Customers: Don’t Buy New Stuff
It’s not often that a company tells customers not to buy its products, but that’s essentially what apparel-maker Patagonia did last week when it launched its “Common Threads Initiative”—a program that encourages customers to reduce consumption and their environmental impact. “This program first asks customers to not buy something if they don’t need it,” Patagonia founder Yvon Chouinard said in a statement announcing the plan. “If they do need it, we ask that they buy what will last a long time – and to repair what breaks, reuse or resell whatever they don’t wear any more. And, finally, recycle whatever’s truly worn out.” As part of the initiative, the company partnered with eBay to launch an online marketplace for used Patagonia gear, and while eBay will still collect its usual fees, Patagonia won’t make any money from those sales.

So what’s in it for Chouinard’s company? Couldn’t this dent sales, which last year totaled $414 million? “We don’t really care,” says Patagonia spokeswoman Jess Clayton. “The goal of it is to do the right thing and to be able to give customers the option to buy used because that’s what they should do as opposed to buying new, for the environment. It doesn’t matter how it affects sales.” Clayton admits that this could be seen as a marketing move that plays up the durability of Patagonia items and will resonate with the company’s environmentally conscious customer base, though she emphasizes that wasn’t the motivation for the program. “In the past when we’ve made decisions like this, it’s always made the company money,” says Clayton, noting that the company’s decision to switch to organic cotton in the 1990s, despite the increased costs, turned out well. “Our customers, especially, are really in tune with this stuff. And they’re psyched.”