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October 13, 2008

2009 May Be Worse Than 2008 For Retailers

Most retailers prosper during the holiday season. If sales are down for the rest of the year, holiday time makes up for the slump. However, this year it looks like the holiday season will not be enough to save retailers that are on the verge of bankruptcy. Consumers simple do not have the money to spend. Holiday shopping is expected to be way down from previous years.

The credit freeze and slumping sales may be the reason that many retailers go out of business. As 2009 rolls around it may be impossible for some of the retailers that have had a terrible 2008 to stick around. So, even with as bad as it has been this year for retailers, things could get a whole lot worse.

Merchants were already dealing with decreased sales before the major credit crunch that is currently going on. Same store sales went up mere 0.8% after being forecasted to have an increase of 1.5%. Same store sales of 3% are generally thought of as representing a healthy U.S. consumer market. Consumer spending is a huge part of the U.S. economy so to see it slumping so dramatically I bad news for the entire country as well as globally. While the U.S. economy is just one of the major world powers to watch when it comes to how the world does financially, it also effects others countries. Over two dozen stores have given in to the spending slump and gone out of business or sought out Chapter 11 bankruptcy protection.

Consumers do not have the ability to buy right now. This leaves retailers will no choice but to offer huge sales and discounts on merchandise. While some consumers will take advantage of the sales, there will be a fewer amount of people that can buy things. This will bring in a reduced profits and many retailers will come up short.

November and December can represent 50% of retailers profit so companies that have had a terrible year have a chance of making up lost profits. However, this year, the retailers that have not brought in much of a profit are will not have that extra boost at the end of the year. The last ditch effort to make a profit will be foiled for this year.

Experts warn that some of the retailers that have been around for many years may be on their way out in 2009. This will of course feed the unemployment rate and the lack of consumer spending power. Retailers’ ability to get short term loans from banks will be next to nothing during the credit freeze. Long term loans for large projects such as businesses will also be unavailable for the sot part. This will lock the economy into a slow moving tightly functioning unit that does not allow for retailers that are on the edge to survive.

It seems that no one has a good answer for this problem. The credit freeze may provide some relieve in one sector but retailers will suffer as a result.

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