Seasonal Shopping Hoopla Results In Biggest Post-Holiday Retail Depression In Years

The malls are hushed, the streets of city shopping districts have stopped humming and the online buyingpalooza has slowed. Yep, it’s that time of the year after the holidays when everyone is finally done shopping. Unfortunately for retailers, they’re facing the biggest post-holiday depression since 2009.

Reuters says early in the new year is always a slow time for stores, after the immediate post-holiday sales are over and shoppers have thrown in the towel. This year it’ll take even longer for consumers to pick up the pace again, however.

After splurging so much this holiday season, consumers still wary of the economy will cut back on spending now, say experts, in order to pay off credit card bills from the holiday shopping rush.

“The first and second quarters this year will see a deeper low than last year. Sales in the week after Christmas were so strong that took a bite from January,” retail consultant Jan Kniffen told Reuters.

He says shopping traffic will likely be down 2-3 percent, whereas last year it stayed about level or even improved a bit from the year previous.

Because consumers were finally gaining confidence back in the wake of the 2008 recession, more shoppers used their credit cards, said a study by America’s Research Group. That same surge will cause sales to plummet now that the holiday shopping is over and credit card bills start to arrive.

Things might be okay for retailers throughout January as gift cards are redeemed and items are exchanged or items go on clearance, but February will most likely suffer from the lack of fresh incentive to shop.

Holiday hangover means slow 2012 start for stores [Reuters]

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  1. baineschile says:

    suprising actually. with the rise in gift cards, one assumes that there is a spike throughout the month of Janurary.

    • dolemite says:

      i thought that too (as we received a ton of gift cards this year), but those count as sales when purchased, not when cashed in. However, they might result in other sales while in the store.

      • frank64 says:

        I think they are actually counted as sales when the cards are used.

        • exit322 says:

          Correct – you’d credit a liability account, not sales, when a gift card is bought. The sale is then registered either after some period of time has passed (e.g. when the accounting figures Jimmy’s lost the last $7 on his gift card, and that’s straight revenue) or when it’s used.

          • Loias supports harsher punishments against corporations says:

            I have to disagree – From an accounting perspective, the money is earned when the card is bought.

            Whether they apply gift cards differently when determining sales volume, inventory, peak sales, etc. is one thing. But from an account perspective, the money is earned when the card is purchased.

            • frank64 says:

              No, because it hasn’t been matched with the cost of good yet. (expense). When you buy it is as rpm773 says, unearned revenue.

              • frank64 says:

                I meant exit and not rpm.

                I found a reference:

                “DELAY IN RECOGNITION OF SALE
                SEC Staff Accounting Bulletin no. 101 generally requires the transfer of product (merchandise) as a necessary condition for revenue to be recognized. SEC Staff Accounting Bulletin no. 104 provides additional guidance. When a retailer sells a gift card to a customer, the payment for a future purchase is received upfront, but transfer of merchandise is delayed at the consumer‚Äôs discretion. So, instead of recognizing actual revenue on the sale of gift cards, retailers record a deferred revenue liability on the balance sheet for the cash exchange until the gift card is redeemed.”

                http://www.journalofaccountancy.com/issues/2007/nov/accountingforgiftcards.htm

                • exit322 says:

                  Yep, that’s the reference. Now, a cash-basis accounting might consider that revenue, given the cash was received. But there’s still some liability there (e.g. you got $50 for a card that says the holder of the card can get $50 worth of stuff at your store).

                  Either way, I think gift cards are taxable income when sold, not when redeemed.

                  • frank64 says:

                    I am almost positive it isn’t taxable either, but I couldn’t find a reference. It is a loan, and not a taxable event until used. I could find no reference to a book/tax adjustment, so it would go with the books, and even a cash basis wouldn’t record it as a sale.

    • rpm773 says:

      Don’t go redeem your gift cards in Jan. You’ll just be picking through the bones of Xmas refuse.

      Wait a few weeks until the inventories are replenished.

  2. Rachacha says:

    Hey retailers, perhaps this is a side effect of beginning the Christmas shopping season in August?

  3. Cat says:

    On the plus side, there has been a huge uptick in pharmaceutical sales.

  4. Don't Bother says:

    I know that at least where I work, they are looking forward to the traffic slowing down. The whole store is being “reset,” so the decrease in traffic means we can get more tasks done during the day.

    • tsukiotoshi says:

      Yeah the store I worked at through the holidays was really hoping things would calm down soon so they could get caught up on inventory, organizing, etc. We were so busy even the first week after Christmas we just didn’t have time to re-organize shelves and products when we desperately needed to.

      Of course, that was on the ground managers and employees hoping things would calm down. I’m sure district and Corporate don’t want it to.

  5. CubeRat says:

    Not me. Buying a smart phone today and an e-reader this week. Buying now furniture, hopefully in the next month. And, plan to have at least one bathroom re-done this year.

    2012…..Year to spend money (in case the end of world people are correct LOL).

    • kennedar says:

      Lol we just bought a new recliner on the weekend and are planning on spending a ton between now and March. In our case its because we are expecting our first child, so there are a ton of things we need to buy! Yay sales!

  6. CrankyOwl says:

    I’m doing my bit to keep the economy alive. I got a free month of Amazon Prime with my Kindle Fire, so I’ve been shopping up a storm.

    • Fiona says:

      Me too. I got my mom a Kindle Touch for Christmas and loved it so much that I have to buy myself one now :P.

  7. SmokeyBacon says:

    We didn’t do Christmas gifts this year but were hoping to do a bit of shopping once things calmed down (even if stuff wasn’t on sale) and when we went out this past weekend it was still crazy busy, so hopefully the whole February will be slow thing is true. I hate trying to shop when it is super busy and so if it isn’t a necessity I usually bail when it is too crowded.

  8. kataisa says:

    related story-

    Record Holiday Gift Returns Create Shipping Wave

    Sadly, I fear our Thanksgivings will now be permanently marred by black friday shopping sales creeping into Thursday nights thanks to stores opening earlier, and the dumb shopaholic sheep fell for the bait.

    • Outrun1986 says:

      This can only be good for the USPS and UPS, people buy more gifts online these days, they have to have them shipped to their house. Now not only do they have to have them shipped to them, but return shipping will create additional business for the USPS and UPS since customers now have to ship their unwanted gifts back.

  9. SporadicBlah says:

    I don’t know who to believe! Yahoo just reported that the economy is recovering, Christmas sales were way up over the last few years and unemployment is at its lowest in 3 years.

  10. Nuc says:

    Wow really? The biggest post-holiday depression since 2009? I didn’t realize records even existed that far back.

    • Bativac says:

      That’s what I was thinking. 2009? The Before Time? The Long-Long Ago? Do we still have documents from that period? Or was someone building a parking lot and uncovered fragments of old websites as they started digging?

  11. Outrun1986 says:

    I do not want to hear retailers crying about how bad things are, this holiday season stores were packed so much here that shoppers could not even move. Traffic was so bad you could barely get into a store parking lot. I have not seen it this bad in 3 or more years. Also retailers were not keeping up with the demand, I have nothing to say if you cannot keep your store stocked, that is the fault of the retailer. People go into the store and find empty shelves, they obviously cannot buy because the product they want or need is not available. This is not the consumer’s problem. In many cases this holiday season I have seen shelves wiped clean and they stayed that way for a while. Even now some shelves at some stores are still empty. If retailers want people to buy they have to stock merchandise for people to buy!

    Retailers cannot realistically expect this type of spending to continue this way all year round. Of course there is going to be a drop off at some point especially when society encourages us to do all of our spending during November and December. Putting out the Xmas decorations in August means that some of that spending that would have been done during the actual Christmas season on decorations is now deferred to the months of August-December 25th.

    • StarKillerX says:

      “Putting out the Xmas decorations in August means that some of that spending that would have been done during the actual Christmas season on decorations is now deferred to the months of August-December 25th.”

      Exactly!

  12. Alliance to Restore the Republic of the United States of America says:

    So it’s been the worst day since like day before yesterday?

  13. Conformist138 says:

    If the start of 2009 was worse, that really only means there were two post-holiday seasons in between. This is a problem with how we judge everything these days. We never expect fluctuations. It happens, guys, not every year builds up into infinity! We need to stop comparing every week or even every year, it gives the false idea that not constantly doing better means there’s a problem.

  14. DonnieZ says:

    “Years..”???

    Depending on how one reads this, it could be a span of two or three years. It could read 2009 holiday shopping season, so the depression occured in 2010. (Which would equal 2 years). Or it could read that the depression that occured in 2009 was a result of the 2008 holiday season, which would indicate three years.

    When someone says ” hasn’t happened in years!”, I think more in terms of 5-30 years, not two.

    I think this Carlin example applies here:
    “Can someone explain to me the need for one-hour photo finishing? How can you possibly be nostalgic about a concept like “a little while ago”?

  15. ParanoidGeek says:

    I’m waiting on some of my local big-box stores to actually restock the shelves. I try and stay away during the big shopping/return times and had a bunch of things to pick up last week. Some of the stores still had that completely picked through look and were still out of stock on many items.

    • Outrun1986 says:

      Same here, if retailers want us to buy they have to have stock. Then when shelves are bare I hear them crying about not having enough product, if you have an in-demand product stock more of it! Provided that the manufacturer of the product is not running out itself.

  16. smo0 says:

    It just means people are getting smarter – like me, I stopped buying, waiting for the bills to come to pay them off before I resume normal shopping schedules… I will not be behind again, I refuse… if that means the death of the economy then something needs to be changed.

  17. Kuri says:

    I was waiting for the prices on cameras to go down after CES.