Unpredictable circumstances—both political and meteorological—took their toll on the latest Dealerscope CE Retail Confidence Index survey (DS Index). Retailers, entering February, reported on overall confidence score of just 161.66, a 27.4-point drop off from January. That’s the largest single-month decrease the DS Index has experienced in its nearly three-year history and one that helped send the survey to its lowest total on record.
According to retailers who responded to the survey, the main reasons for the downturn were factors that were really out of their control. For starters, this survey was conducted while the U.S. government was in the midst of what ended up being the longest shutdown in American history. During the 35-day shutdown, some 800,000 federal employees were impacted, roughly half of which had to work without pay for more than an entire month. That, of course, had a ripple effect throughout the rest of the country as those employees missed multiple paychecks, and potentially delaying the distribution of tax returns.
Another source of stress for CE retailers this month came via Mother Nature. A large chunk of the United States was hit with severe weather over the past month in the form of snowstorms and a polar vortex that brought with it bitterly cold temperatures.
“The weather has been terrible,” one retailer said. “It’s been snowing every day, which makes travel to jobs impossible. Some jobs are closed off now until the spring.”
Other retailers reiterated similar sentiments, noting that weather has had a major impact on foot traffic into their stores and, ultimately, their sales goal performance for the month. With the roller coaster forecasts that are projected for the next few weeks, the DS Index shows that retailers remain wary of how it could continue to impact their business throughout February.
Holiday Sales Were Soft
The confidence downturn can also be directly correlated to a negative trend in consumer electronics retailers’ sales performance over the past few months. In the DS Index survey, retailers have seen their sales goal performance decline during what are supposed to be their strongest months of the year. In both November and December, more retailers reported missing their sales goals on a month-over-month basis. In December, it was nearly a 50-50 split.
Even more concerning, though, was that retailers weren’t just missing by a little bit. According to those surveyed, 23 percent reported missing their sales goals by 11 percent or more, which was the highest figure since July 2018, and a 15-point jump over November’s sales results.
Again, retailers pointed to poor weather as a major culprit. But it’s also possible that, given the confidence the industry had going into the final quarter of a better-than-expected year for retail, stores set their marks too high and expected a bigger holiday turnout than what actually occurred.
That’s reflected, as well, in retailers’ confidence around their ability to drive foot (and online) traffic.
Despite reporting some of the highest confidence levels for that metric in November and December, the industry quickly took a downward turn at the start of the year—likely in response to what they were seeing unfold in their brick-and-mortar locations.
Products Get Pounded
The hard downturn in overall confidence for the DS Index had an even more drastic effect on the individual product categories that Dealerscope surveys for each month. For the second month in a row, not a single product experienced a month-over-month confidence level increase. Every single product category fell off by at least half a point, with some of the hardest hit falling over two full points.
Retailers were particularly tough on the product categories that they haven’t had much confidence in throughout this survey’s history—things like VR, Emerging Tech, and Digital Imaging.
Despite the record-setting low score that retailers produced entering February, we're still sticking to our prior prediction that 2019 would turn out to be a solid year for the CE retail industry. A quick review of our prediction pointed to early-year struggles due to ongoing political issues—particularly revolving around the ongoing trade impasse with China and the looming threat of tariffs. Progress has reportedly been made on that front with a supposed summit being set up between President Trump and China's President Xi to work on a resolution. So here's hoping the weather improves quickly and that lawmakers can avoid another potential shutdown later this month.