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Small retailers need a holiday boost, analyst says
By Adrienne Burke, November 29, 2012
Despite all the good publicity around Small Business Saturday, sales have been shrinking for the smallest retailers while their larger competitors are seeing strong growth this year.
According to data from Sageworks, which provides financial analysis services to private companies, 2012 will be the worst sales year for privately held retailers with annual sales of below $1 million since 2009.
Those small retailers have posted a nearly 3 percent drop in sales year to date. Meanwhile, privately held retailers overall are seeing a nearly 6 percent increase in sales volume this year, and privately held retailers with annual sales of more than $10 million have seen a roughly 11 percent increase since last year. Sageworks data does not cover publicly traded companies such as Walmart, Kohl's or Target, but spans retailers from small Mom & Pops to privately-held chain stores.
Sageworks analyst Libby Bierman says the firm's data shows that the smallest retailers are seeing a setback after two years of growth. While all retailers saw a decline in sales of around 6 percent in 2009, volume picked up in 2010 and 2011. Larger retailers rebounded faster and with a wider stride, but retailers with under $1 million in annual sales saw positive growth of about 2 percent in 2010 and of between 3 - 5 percent in 2011.
With an economy in recovery and a growing "buy local" trend, why should the smallest retailers be seeing less sales volume this year than last, let alone the worst sales year since 2009?
Bierman notes that while Sageworks collects financial data, it doesn't survey companies to explain it. However, she says trends in consumer spending behaviors offer some clues about what's happening in the industry.
"It's how people are buying that is impacting the smaller retailers more than the larger ones," Bierman says. While larger retailers have been savvy about adopting online sales and advertising strategies, small retailers, she says, "might be wearing multiple hats, running the register, placing orders, and acting as CFO, so the amount of attention they give to their website or advertising online does not compare to what the larger retailers can do." Bierman adds, "Larger companies have the resources, but smaller businesses are responding to online behaviors and new sales methods more slowly."
To be sure, the Sageworks data was generated before Small Business Saturday. "These figures could change through the rest of the year," Bierman says. "But the trend we've seen is that these smaller companies have slower growth. They're in a position right now where they could use a bit of help."
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