Grant?s demise.
W. T. Grant, one of the United States? largest retail firms, was ordered liquidated this February, and it closed its remaining 359 stores in March. The company was founded in 1906?with an investment of $1,000?by William T. Grant, who put a sign in his first store?s front window proclaiming ?a new kind of store?a department store with nothing over 25 cents.? By the time of the firm?s closing, its merchandising and operating policies had undergone drastic change. It had removed all ceiling prices and had added numerous lines of merchandise to its offerings, including furniture and appliances. The firm had also shifted its emphasis from urban to suburban retailing. Despite policy changes, Grant?s remained a working family?s store, with inexpensive ready-to-wear clothes and drygoods staples as the backbone of its regular business. By the early 1970?s, Grant?s had grown into a chain of about 1,200 stores, and its total annual sales were about $1.6 billion. The firm reported a profit for each of its first 67 years except 1932, the low point of the depression. Unexpectedly, the profit picture changed in 1973, and after suffering a huge deficit in 1974, the firm filed for bankruptcy.
Retailing personnel.
Information recently released by the U.S. Department of Commerce indicated that the percentage of retailing personnel in the distribution industry work force has been declining. The distribution industry employs about two of every five U.S. workers. The number of distributive workers expanded rapidly between 1950 and 1973, from 18.8 million to 32.2 million in 1973. Although the retail trade gained 4.2 million workers over the same period (from 8.2 million in 1950 to 12.4 million in 1973), its relative share of distributive workers dropped from 44 percent to 39 percent. In contrast, the services industry added 7.5 million workers between 1950 and 1973, practically doubling its 1950 work force and increasing its relative share of distribution?s total number of workers from 42 percent to 48 percent.
Retail sales.
January-June 1976 retail sales were $317.9 billion, $35.3 billion (12 percent) above sales for the same period of 1975. Of the several sales groups, automotive sales rose the most; they were $13.3 billion, or 27 percent, higher than for the first six months of 1975. Sales of building materials, hardware, and farm equipment and of furniture and appliances made the next best showings, with relative sales increases in 1976 over 1975 of 15 percent and 13 percent respectively. With the closing of W. T. Grant, variety stores saw their sales for this January-June fall 5 percent below their 1975 level for the same months. Surprisingly, liquor stores had only a 3 percent sales gain in the first half of 1976 over the same months in 1975?the smallest relative gain registered by any of the remaining sales groups.
Apparel sales.
For the first six months of 1976, apparel sales were 7 percent higher than in the same period of 1975. The 7 percent sales gain was only slightly more than half of the total relative retail sales gain for the period and 2 percent below that reported by the general merchandise sales group. As in past years, women?s apparel seemed to have claimed a far larger share of the increased spending than did men?s apparel. For the third successive year, shoe stores relative sales gains failed to equal that reported for the apparel group as a whole.
Chain stores.
Firms operating 11 or more retail stores boosted their share of total retail sales from 18 percent in 1951 to 32 percent in 1974. The major part of this increase occurred in the 1960?s, when chain stores? share of total sales climbed from 23 percent to 31 percent. In the first six months of 1976, multiunit firms had a 9 percent sales gain over the same period in 1975?just equaling the relative sales gain reported by the nondurable goods stores as a whole.
Automobile sales.
From 1970 to 1975, the U.S. population grew from 203 million to 213 million, and the number of cars on the road increased from 88.8 million to an estimated 107.4 million. These figures translate into one car per 2.3 persons in 1970 and one car per 1.9 persons in 1975. This year?s booming car sales were unlikely to reverse the downward trend in persons per car on the road. January-August 1976 domestic and foreign-made car sales totaled 6.8 million?1.2 million, or 22 percent, higher than in the same period of 1975. From 1975 to 1976, foreign automakers have seen their share of the American market deteriorate rather badly. Of this year?s 6.8 million total unit sales, domestic-made cars accounted for 5.8 million, or 86 percent, of the total, and foreign-made cars accounted for almost 1 million, or 14 percent, of the total. In contrast, of last year?s 5.6 million January-August total sales, domestic-made cars represented only 4.4 million, or 80 percent, of the total, and foreign-made cars accounted for 1.1 million, or 20 percent, of the total. Foreign-made cars lost 6 percent of the auto market.
Retail inventories.
June 1976 retail inventories of $76.7 billion were $5.8 billion, or 8 percent, higher than the June 1975 total of $70.9 billion. Nondurable goods accounted for $3.6 billion, or 62 percent, of the increase and durable goods for $2.2 billion, or 38 percent. As a result of seemingly more effective inventory controls, durable goods inventory-sales ratios were reduced about 10 percent
Consumer spending.
The increasing level of annual expenditures maintained in the past inflation years continued in 1976. Consumers raised their annual rate of spending in the second quarter of 1976 by $104.5 billion, about 11 percent, compared with the same quarter in 1975. Of the increased spending, services contributed $47.5 billion, or 45 percent; non-durables $29 billion, or 28 percent; and durables $28 billion, or 27 percent.
Consumer credit.
Consumers not only spent more in the first half of 1976, they borrowed more. At the end of June, the outstanding debt of consumers totaled $166.7 billion, or $14 billion more than at the same time last year. Of the $14 billion increase, commercial banks acquired 42 percent; credit unions, 33 percent; finance companies, 18 percent; retailers, 4 percent; and others, 3 percent.
Prospects.
Despite a somewhat sluggish sales trend later in the year, 1976 retail sales were expected to total about $650 billion. According to a New York Times report this September, reasons for decreased consumer buying in the second half of the year were ?concern over inflation, uncertainty over national and local political elections, and caution caused by conflicting economic news.?
Among the problems expected to plague retailers in 1977 were the following: how to handle the rising flood of government regulations at a cost retailers can afford; how to meet the mounting number of price-fixing investigations being initiated by various government agencies and consumer groups; how to control employee dishonesty; what to do about ?give-away? games and trading stamps as promotional devices; whether to expand operations in the suburbs or in reviving downtown locations; and how to control and keep inventory assortments adjusted to consumer demand without straining the retailers? financial capabilities.
Advertising
U.S. advertising volume moved sharply upward during 1976, considerably exceeding the pace of the general business recovery and heading toward an estimated new high of $32 billion. Preliminary figures prepared for Advertising Age by Robert J. Coen, vice-president for research at McCann-Erickson, forecast that this year?s total volume would represent an increase of at least 14 percent over 1975-the highest rate of increase for any year since the end of World War II. The upward surge was attributed to a combination of factors: the improved business outlook, a presidential election year, and extra marketing efforts in connection with the bicentennial celebration.
Freedom of speech.
In a landmark 7-1 decision in May the U.S. Supreme Court extended First Amendment free-speech protection to many forms of advertising. Although accepting the premise that certain aspects of advertising may be subject to regulation by Congress and other governmental bodies, the Court held that advertising the availability and price of a product was an activity in the public interest and that such information was indispensible to proper operation of the marketplace in a free enterprise system. The decision came in a case in which a citizens? group challenged a Virginia law prohibiting price advertising for prescription drugs. Earlier Court decisions had implied that ?commercial speech? fell outside the scope of the First Amendment, but the majority opinion in the Virginia case left no doubt that this was not the present Court?s view. The ruling came at a time when the Federal Trade Commission was raising serious questions about the virtual prohibitions against the use of advertising by members of such professional groups as the American Bar Association and the American Medical Association. In late June the Justice Department filed an antitrust action against the ABA for restricting advertising by its members, contending that this practice constituted illegal restraint of competition.
FTC actions.
The Federal Trade Commission?s regulatory emphasis seemed to change direction somewhat during the year. Apparently satisfied to leave much of the responsibility for curbing misleading advertising to the industry?s self-regulating mechanism, the FTC placed heavier emphasis upon increasing competition through fostering greater use of comparative advertising and through eliminating barriers against advertising by such professional groups as doctors, lawyers, and pharmacists.
In what was called in some quarters an ?earth-shattering? decision, an FTC administrative judge recommended in September that the Borden Company be required to license its Real Lemon brand name to competitors, to end an alleged monopoly in the processed lemon juice market. This action, if supported by the full commission, could undermine the whole concept of trademark protection.
Self-regulation.
In April a federal district court in Denver dismissed a civil suit that had threatened to undermine the activities of all advertising review boards. The plaintiffs, a Denver reducing salon and its parent corporation, had charged that in labeling their advertisements deceptive, the Advertising Review Council of Metropolitan Denver had violated their civil rights and unconstitutionally infringed interstate commerce. Soon after the suit was filed last year, insurance companies began withdrawing libel coverage from advertising review boards throughout the United States, and in many places all self-regulation activities ground to a halt. The future of such self-policing agencies seemed ensured, however, when the Denver judge ruled that the actions of the city?s board were within the reasonable scope of an industry?s efforts at self-control and did not infringe upon the complainants? civil rights.
Media.
Television advertising continued to show a faster rate of growth than advertising in any other communications medium. Substantial increases in the prices quoted for both network time and time offered by individual stations helped to boost television advertising expenditures by more than 20 percent over 1975. The success of the ABC television network in moving to the top of the ratings ladder for much of 1976 brought about a greater parity in audience size and prices for commercial time among the three networks than had prevailed in a number of years.
Radio and newspapers also showed significant increases in advertising dollar volume during the year. Magazines reversed the decline of the past two years and posted a healthy gain in advertising dollars, although problems with rising costs of paper, printing, and distribution continued to plague them.
Agencies.
The annual report of the American Association of Advertising Agencies, released in late July, presented a somewhat improved financial picture. According to the report, agencies? average profit margin rose 14 percent in 1975. Net profit after taxes for incorporated agencies averaged 3.91 percent of gross revenue, the highest level since the 4.03 percent figure reached in 1969. Net profit as a percentage of total agency billings rose from 0.65 in 1974 to 0.77 in 1975, an increase of 18 percent. It appeared that effective cost controls were enabling agencies to withstand the inflationary pressures that had been squeezing profits.
J. Walter Thompson continued to be the largest U.S. agency in total world billings during 1975, according to figures compiled by Advertising Age. In domestic billings alone, however, it was again surpassed by Young and Rubicam. Dentsu Advertising of Japan once again was the overall leader in world billings. The extent of U.S. advertising agency involvement abroad was indicated by figures showing that four of the top ten U.S. agencies had greater billings outside the United States than at home.
The Association of National Advertisers reported that a survey of its members showed that there had been a further decline in dependence upon the traditional 15 percent commission as a method of agency compensation. Only 68 percent of ANA members indicated that they were depending largely upon the commission method in their compensation agreements, as compared with 75 percent in 1974.
Source: http://astheysawit.com/12405-1976-retail-business.html?utm_source=rss&utm_medium=rss&utm_campaign=1976-retail-business
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