Margin-Starved Retailers to Need More

The Federal Reserve put out its "Beige Book" for the January 29-30 Fed meeting in which it pointed to slowing economic growth, though it showed no sign that a recession was already in effect. However, economists, the Bush Administration, and industry leaders/watchers perceive that recession has already taken hold. Those sentiments are the impetus for the $180 billion fiscal stimulus bill being proposed to give Americans an $800 tax rebate.

Boosting this scenario is a recent CBO report that argued, "So to boost the economy by about a percentage point for half a year, the stimulus would have to be about a percentage point of a half-year's gross domestic product, or about $70 billion," according to a a CBS Marketwatch report. Multiply that 2x to get to the $140 billion the Bush Administration is advocating in an attempt that is likely seeking 1% GDP boost, or at least to buttress the retail market. The same CBO report revealed that consumers spent 20-40% of their tax rebates on retail, which is where the growth comes from. The stimulus is likely to sail through (you heard it here first) because no one runs away from giving money to the electorate in an election year.

However, retail deserves a closer look...

While online retail growth was almost 20% over the holiday season as discussed here, overall retail growth was a disappointment over the same period. Retail sales did grow year over year, although it came in at 3% instead of 4%.

Wal Mart announced earlier this year that it would slow the rate of new store openings in spite of their better than expected growth. Some analysts argue that the company's success is a contrarian indicator as many consumers traded down to bargain basement Wal Mart.

The Wall Street Journal notes some recent hard times among

"Zale Corp. said it would close 60 stores in the next 90 days. Talbots plans to pare store openings and use more frequent markdowns to entice shoppers. Chico's FAS Inc., another clothing retailer, is cutting $100 million of capital spending, including scaling back a distribution center expansion and delaying a new computer project until 2009."

Retail has been surging the last several years possibly started by the tax cuts several years ago, but certainly driven forward by skyrocketing home prices, and falling interest rates. Home-owners were able to continually refinance their homes at lower rates, taking out equity in the process, which they tended to pour back into the retail economy. Home prices have stalled in many places and begun falling precipitously elsewhere in the country. It is questionable how much tax rebates will be able to pull consumers out of the hole, especially in light of the buying binge they've been on and the negative savings rate Americans have presently.

A Win for Mpayy

Mpayy, Inc., which launches in less than 48 hours will provide a solution to many of the problems facing the retail industry. As sales decline, this margin-starved industry will be groping for a few percentage points here and there. One place they can find that is by CUTTING TRANSACTION COSTS, through Mpayy, which will also get them out of the pretty pickle JC Penny currently finds itself in with the recent revelation of 650,000 lost identities.