The holiday season went by in a blur, and suddenly we’ve found ourselves immersed in a highly competitive, volatile 2015.
Financial analysts are offering a forecast that could be described as a wintry mix of snow, sleet and rain, with a dose of sun and blue skies—in other words, a goopy mess in which some retailers will enjoy record years and others will disappear.
Here are some things to watch for:
Fuel’s Gold: At press time, oil markets were roiling, with crude oil hitting its lowest point in more than 5 years. For retailers, cheap gas means better profits thanks to superior penny profits and lower credit-card fees.
There is a real danger, however. Some analysts I’ve talked to fear that many retailers will become enamored with ephemeral gains and ignore systemic problems within their business models. In other words, don’t let what will likely be relatively short gains at the pump fool you into a false sense of comfort.
Retailing: Who could ignore the sobriety that sets in after Jan. 1? Big guns such as McDonald’s, Macy’s, Coca-Cola and J.C. Penney all announced significant cost-cutting measures, from layoff s to store closings. One common element: All are trying to shift from traditional retailing and marketing to a more customized model that transfers greater control to the customer. And in the case of Coca-Cola and McDonald’s, both are fighting negative perceptions as consumers become more health-conscious.
The issue of customization raises valuable questions for small-box operators like us. We may offer some DIY at the coffee bar, but where else are we empowering customers? Are we creating multiple bundling options for day-parts? Are we offering sustainable loyalty programs that engage the shopper? Perhaps more important, are you developing a compelling narrative that engenders affection and necessity? Recently, McDonald’s—after more than 13 months of year-over-year declines—launched a dramatically different TV campaign that centers on love, care and unity.
Unemployment and Wages: Good news: The economy is improving. Bad news: The economy is improving. As we entered 2015, the Dow Jones industrial average surged, wiping out early 2014 losses. S&P and NASDAQ finished in the black, despite a dreary start. Also, the national unemployment rate continued to fall, ending 2014 at 5.6% after the addition of 250,000 jobs.
The sobering news is that while more Americans are finding work, most (including much of the c-store employment pool) are facing income stagnation. Discussed in CSP’s October 2014 cover story, the channel could face a harsh reality. As the economy improves, workers will more readily switch jobs based on compensation and treatment. Are you rewarding the folks you value most, at headquarters and at the store level?
Security: This month’s cover story by Angel Abcede, which begins on p. 18, is mandatory reading. The word “hack” is taking on an increasingly stark and sophisticated definition. How are you protecting your financial and IT systems? How are you telling customers that their credit- and debit-card information is safe with you? What protocol do you have in place in case you are hacked? The costs, both in lost income and lost consumer confidence, can be devastating. Just ask Target.
Going, Growing or Standing Still: The year 2014 brought three multibillion-dollar deals in the channel, a glut of multimillion-dollar transactions and a wave of new private-equity players. With interest rates still pathetically low and the rise of MLPs (master limited partnerships) not yet having crested, we expect robust M&A activity in 2015.
What are your financial options? If you’re in a poker mood, are you making the necessary interior and exterior investments to hold onto your hand, or are you talking to financial experts to investigate whether you should fold? Are you well positioned to go all in and take your business enterprise to a new level? The Fed has said it is likely to raise rates, even if by only a little. While the U.S. dollar is strong, now is a critical time to assess your positioning.
Gas Tax: It is no secret that the federal Highway Trust Fund is broke and no longer self-sustainable. It is equally agreed across the political spectrum that our country’s infrastructure is rapidly deteriorating.
With Republicans now holding both houses and the 2018 races soon to begin, we expect a compromise measure that will raise the 18.4-cents-per-gallon federal gas tax for the first time in more than 20 years. And interestingly, we find NACS, SIGMA, NATSO and PMAA all supporting a modest increase as one of the preferred solutions.
Eating Healthy: Customers are craving healthier and more wholesome options. The decline of McDonald’s and the success of Chipotle are not isolated cases. No one is saying you should dump the candy bars and carbonated soft drinks. But you do need to balance those sweets and saturated fats with better-for-you alternatives, or else you risk losing market share very swiftly.
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