1. One of the reasons for weak holiday sales could be the increase in gas prices. Since web sales rose steadily to $26.3 billion and did not involve gas expenses of 3$ per gallon in driving to the malls, it appears that weak store sales could be the result of high gas prices (Barbaro, 2007). Secondly, customers were also on a tighter budget and reluctant to spend because of concerns about the economy, including the slowing housing market and tight credit. It is notable that sales increased 2.7% at Walmart, which relentlessly slashed its prices, thereby gaining favor with consumers who are anxious about the economy and have tightened their purse strings.
(Barbaro, 2008). Thirdly, another reason cited for the slowdown in sales especially in women’s clothing is the complaint about dreary fashions. Since men’s clothing registered a 2.3 percent rise in sales, the reasons for specific declines in the women’s category could be lack of appealing fashions. However, it appears that the tightening of purse strings of consumers may be largely caused by the condition of the economy. 2.
A truly agile supply chain requires a fast and appropriate response to fluctuating customer demand. Especially in the case of fashion oriented products, market responsive supply chains are focused on speed and flexibility, rather than on saving costs (Aitken et al, 2002). However, in this instance, it appears that major retailers were unable to reach profitable levels because they were not able to respond effectively to customer volatility in demand and could only produce dreary fashions which were not inspiring enough for customers to purchase.
Therefore, what was need was a higher level of responsiveness to customer tastes and demand, in producing fashions which would generate sales. 3. The most important reason for Walmart’s increase in sales was its relentless slashing of prices early in the holiday season, which helped to address consumer anxiety about the economy. Despite lack of fashions, the low prices could have been the spur for customers to purchase apparel from this retailer. The retailer featured heavy discounts every weekend throughout November and the low prices attracted customers to shop there.
Most of the other stores retailers showing profits were also discount stores such as TJX, BJ, Costco and Ross stores. The department store Saks and specialty retailers Aeropostale, Pacific Sun wear and Children’s place posted stores, as did all the drug stores. The other discount stores may have shown a profit because they sold items other than clothing, and customer sales of electronics goods increased, as also the sale pf pharmaceutical products. At Saks and the specialty stores, high priced footwear items registered high sales, also being non apparel items.
These small stores may have shown a profit due to higher volume of sales by high income groups. 4. Due to the decline in sales, most of the retailers being forced to offer huge discounts, would end up selling their goods at cost price or even lower than cost price, which would produce a loss. The margin of profits is drastically reduced and when selling at cost price, the profit levels are zero, thus allowing no room for the retailers to accommodate their expenses and producing a net loss.
Therefore, the gross margin of profits has fallen drastically due to the need to mark down prices, allowing little margin for any profits to accrue to the retailers. 5. The retailers could make the offer of buy-one-get-one-free, to induce customers to not only purchase goods, thereby disposing of stocks, but also reducing the inventories at the same time by clearing out two items with every single purchase. Another option the retailers could follow is to offer large discounts on bulk purchases of goods – for example by slashing the prices by about 50% for the customer who purchases six sweaters at a time.
This would attract budget conscious customers who also want items of value. The last alternative is for the retailers to offer the unsold garments at nominal cost as part of a package offer with the purchase of other goods, such as footwear for instance, so that a customer who purchases such an item is able to receive some of the unsold stock and in this way, the retailers can clear out their inventories.
They could also consider refurnishing some of the garments by dyeing them in other colors, or making some minor changes in designs to offer a more appealing range of products to fashion conscious customers. 6. Since the economy is still in a somewhat depressed state with tight credit and rise in housing prices, it appears unlikely that customers who did not purchase goods during the Christmas season will increase purchases in the spring. The supply chain which is responsive to customer demand needs to be one that provides for greater visibility throughout the supply chain, by fully exploiting information and technology through cooperation and collaboration between the various organizations within a corporation (Harrison and Hoek, 2002).
The retailers must therefore arrange for better coordination and integration of information flows between customers, and their production and distribution systems so that the kind of products they produce reflect customer needs. The items may also need to be priced within a more moderate range in order to take into account the conditions of the economy and the tighter control over purse strings exerted by customers.
As a result, what is required is greater responsiveness to customer requirements and lower prices in order to boost sales during the spring season. References: * Aitken, J, Christopher, M and Towill, D, 2002. “Understanding, implementing and exploiting agility and leanness”, International Journal of Logistics Management, 5(1): 59-74 * Barbaro, Michael, 2007. “Disappointing Sales during holiday season”, The New York Times, December 26, 2007, Retrieved January 18, 20-8 from: http: //www. nytimes. com/2007/12/26/business/26shop-web. html? _r=1&oref=slogin * Barbaro, Michael, 2008.
“Weak December sales for retailers”, The New York Times, January 10, 2008. Retrieved January 18, 2008 from: http: //www. nytimes. com/2008/01/10/business/10cnd-shop. html? ref=business * Harrison, A and van Hoek, R, 2002. “Logistics management and strategy”, Harlow: Pearson Education