Sail America President Sally Helme recently asked me to reflect on recent trends on both the retail side of the boating market and the broader retail industry, as well as how I think those indications may serve as a bellwether for the sailing industry in the months ahead. So many of the retail business statistics in the sailing industry are mixed in with the general boating numbers, and impacted by retail trends overall, that I felt it was important to reflect on recent trends from both areas.
Retail trends so far in 2010 continue to show mixed results, even within the broader retail industry. Overall, we continue to see a slow, cautiously optimistic recovery, which for most companies is still far short of the pre-October 2008 levels of business.
Very recently, a composite of 30 larger retailers, as reported by Kantar Retail, showed a strong November 2010, with comparable store sales increasing in the +6.0% range. Analysts are quick to caution that much of this could have been driven by “bargain seeking” consumers, taking advantage of significant discounts and especially the recent “Black Friday” weekend.
According to the research firm ShopperTrak, retail spending increased 0.3% on the day after Thanksgiving – “Black Friday” – as compared to last year, and overall store traffic increased 2.2%, for the three-day weekend. “This means the American shopper has adapted to the economic climate over the last couple of years and is possibly spending more wisely as the holiday season begins.”
In the marine industry, we continue to see an overall slow recovery, with very mixed results for retailers, e-commerce, and wholesale businesses. The overall trends seem to be in the +1.0 to 2.0% range, with wide variances based on company size and channel. Exact numbers are difficult to quantify as so many of our sailing industry businesses are private, or like in our case at West Marine, trailing public numbers. Recent traffic in boat shows, such as Fort Lauderdale, are “rumored” to be in the 5-6% range, Newport in the +10% range, and Annapolis Sail “up considerably.” Show management typically doesn’t report exact traffic numbers, with some dealers reporting nice increases from 2009, but most still far short of pre-2008 levels. Caution continues to reign, and many companies are seeing gains that are presently simply filling gaps left by businesses that are out of business, masking continual industry contraction.
At West Marine, we reported that our comparable stores (revenue in stores open at least one year) rose 3.7 percent for our fiscal Q3. “Comparable” or “comp stores,” reporting is a typical key retail metric as it excludes revenue from stores that have been newly opened or closed. Our revenue from stores opened during 2009 and the first three quarters of 2010 totaled $9.2 million, but we also closed stores during the same period, reducing revenue by $8.3 million. We are continuing to follow our multi-year “real estate optimization” program with the goal of having fewer, larger stores, which can offer customers much larger assortments of core boating gear and apparel. We continue to see strength in categories of products that focus more on “DIY” and recently, a slow rebound of large ticket items.
In talking to some of the more successful retailers and dealers in the industry, the most common theme of successful companies is continual “Innovation” with how they deliver to their customers, or do a better job offering more of what their customers want. Really creative programs in yacht brokerages focusing on more “concierge” services seem to be yielding results.
As far as the upcoming months, I personally think we will see more of what we have witnessed in 2010 continue into 2011. Recent marginally positive unemployment results in November of 2010 as reported by the NY Times, showed a relatively small, but positive increase in jobs of 39,000. This among global economic concerns, continue the continual stream of both positive and negative mixed news.
From the November 24 Kiplinger forecast: “Look for GDP in 2011 to roughly match this year’s expected 2.8% gain. Although much improved over the 2009 decline of -2.6%, that’s subpar for a recovery. In fact, the sluggish growth which followed a rousing 2009 fourth quarter (5% annualized growth) and first quarter of this year (3.7% annualized growth) is raising fears that the economy may tumble into recession again. We think there’s enough momentum to avoid a near-term decline.”
“The economy is actually a bit stronger than first thought. GDP increased at a 2.5% pace in the third quarter, rather than 2% as initially estimated. Growth is holding steady so far in the current quarter, and 2011 should bring more of the same moderate gains.”
In closing, now more than ever, we all have an opportunity to continue to grow our businesses and our industry, by listening carefully to what our customers are asking for and delivering it to them. The lifelong passionate sailing customers, and people wanting to get on the water, are still there for us to serve, but we have to be very creative to entice them to continue to choose to spend their dollars with us, by offering products and services that make it obvious to them that it’s a worthwhile endeavor to pursue.