Hand-me-down sales go up

Secondhand stores such as Buffalo Exchange are pulling in extra cash left and right. The store  has 34 locations across the country from Eugene, Oregon, to Manhattan, New York.  Despite the fact that Buffalo Exchange pays for its merchandise, unlike many other thrift stores, it pulls in revenue of $50 million a year. The recession also causes people to be more willing to sell their clothing, so Buffalo Exchange has plenty of good-quality merchandise rolling in.

Buffalo Exchange isn’t the only secondhand store profiting during the economic downturn. A survey from the National Association of Resale and Thrift Shops says 74 percent had increased sales in October and November compared to last year. Thrift store giants Goodwill and The Salvation Army have both seen significant gains.

Something old, not something new

Regular retail stores haven’t been so lucky. Research shows a 2.3 percent drop in retail sales this year and a 16 percent drop in store traffic. Sales went up in the days after Christmas as shoppers raced to take advantage of post-holiday bargains, but it wasn’t enough to salvage the season.

It was reported earlier that stores were showing lower sales this year. The final figures show sales even lower than expected. Even payday loans didn’t help. The extra cash stores missed out on during the holiday season will continue to haunt retailers throughout the next year.

It’s so hard to say goodbye

In the coming months retails sales will likely continue to decline. The months following Christmas are historically the worst for retails sales. Also, a pattern that emerged in 2008 will likely continue in 2009.

Some big-box stores in strip malls went bankrupt or out of business, leaving the space empty. Without the big-box retailers, the smaller stores in the strip malls saw less traffic and lower sales. As this pattern continues, Excess Space Retail Services predicts 14,000 stores will close in 2009. Chain stores will take a big hit, says the International Council of Shopping Centers, and likely 3,100 stores in that category will close in the first half of the year.

How will this affect me?

Consumers will not only have fewer stores to shop at next year, they will have fewer choices once they get inside. Experts predict there will be less brand variety as more companies go out of business.

Some large prominent chains have already gone under, including Linens n Things, Steve & Barry’s, KB Toys, Whitehall Jewelers and Shoe Pavilion. My personal prediction: Jewelry stores are going to take a hard hit as consumers continue to shy away from buying luxury items.

Even electronics sellers such as Circuit City are barely hanging on. If only payday loans could help.  Unless stores figure out creative ways to pull in extra cash and avoid bankruptcy, we are going to see a whole new landscape in the retail world.

That figure is based on Standard & Poor’s 500 Retailing Index. Interestingly, the index does not include Wal-Mart.

First, the good news

Amazon.com reported its best-ever holiday season this year. Amazon is the world’s largest Internet retailer. Its stock rose nearly 5 percent on Nasdaq. Overall sales among online retailers dropped along with holiday sales nationwide, but Amazon reported selling more than 6.3 million items on its peak day, Dec. 15.

Market analysts attribute Amazon’s success to its variety of products and user-friendly format. Amazon has built a reputation as a one-stop online shop, offering everything from bubble bath to power tools. Plus, for cash-conscious customers, it sells use items at deep discounts.

Online payday loans are another example of consumers using the Internet instead of going to a store.

Now for the bad news

For most other retailers, things were more bleak. Stores such as Macy’s and Ann Taylor offered discounts of up to 70 percent and still saw decreases in sales. Electronics stores such as Circuit City, which usually see higher sales than anyone during the holidays, have sought bankruptcy protection this year.

Unemployment is the highest it’s been in 15 years. As consumers face tightening credit and a recession, spending is being reduced to necessities rather than luxuries.

What took the biggest hit?

Women’s clothing sales from Nov. 1 to Dec. 24 dropped 24 percent compared to last year. Electronics and appliances saw even deeper cuts, falling 27 percent. Luxury items such as jewelry dropped 35 percent, a clear sign that average American consumers are saving their extra cash, if they have any, for necessities.

Overall online sales saw a 2.3 percent decrease, a very small drop compared to the above mentioned retail sales. However, since the inception of online shopping, Internet retail companies have seen year-over-year increases of 15 to 20 percent.

Bringing it home

Online spending at U.S. retailers decreased 1 percent. In 2007, the  nation’s online retail sales rose 19 percent. The U.S. economy shrank .5 percent between July and the first of October, the biggest drop since 2001. Consumer spending during that period was lower than it has been for three decades. Analysts expect more economic declines to end the year.

Now what?

Today, in what many are calling “Black Friday: The Sequel,” many stores are offering discounts of up to 90 percent to try to make up for the dismal holiday sales. Stores including Macy’s, JCPenney’s and Fry’s Electronics opened early today and offered the biggest discounts of the year.

It remains to be seen whether this strategy will help retailers. More Americans are losing their jobs, and more still don’t have credit to rely on any more. It looks like even with the option of online payday loans it’ll be a while before consumers have extra cash to spend on non-essentials.