Retailers Ought to be Optimistic but Cautious

I’ve just come off an hour-long webinar extolling the virtues of the recovering economy and the outlook for 2013—a financial lovefest that also focused on the positive results of Black Friday and Cyber Monday retail sales.

Meanwhile, today’s news reports are practically giddy over last month’s rise in home prices and the recent gain in consumer confidence that is at its highest level since 2008.

Clearly, there is cause for optimism among retailers I’ve spoken with in the past couple of weeks. So, why am I not feeling the love? Probably because they aren’t either.

I have yet to come across anyone who believes that, when all is said and done, 2012, and the coming New Year are going to be barn burners. They are not mired in negativity. They are just being realistic. They know their customers and they say their customers are concerned about the upcoming “fiscal cliff”—a phrase no one outside the Beltway knew just a few years ago—and its impact on their income and jobs and the potential for another recession if lawmakers don’t reach some compromise budget agreement in the next several weeks.

Just yesterday, the White House released a report by the National Economic Council and the Council of Economic Advisers, warning that failure to avert higher taxes for the middle class could reduce consumer spending by up to $200 billion. Of course, there’s some political posturing going on here, but it is also a signal that retailers need to pay even closer attention to consumer spending which drives nearly 70% of U.S. economic activity.

The message for retailers? Be optimistic but be cautious. Hold the line on prices for the basics, continue to cut waste and inefficiency, resist the temptation to over-market higher margin items and pray for a mild winter so consumers aren’t dipping into the household coffers to pay for oil.

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