Posts filed under “Consumer Spending”
Thanksgiving is but a few days away. We celebrate by the giving of thanks for whatever bounty has come your way. It is a warm and wonderful holiday full of family and tryptophan and good cheer.
Black Friday, the day after turkey day, is the official kick off of the season I like to call “Shopmas.” The media will have blanket coverage of all things retail. The intense focus with be a potent combination of PR hype and wishful thinking that if history holds will be entirely wrong.
The annual fabrication of seasonal retail sales data is an American holiday tradition. Sometime over the next week, you can expect to see/read/hear the following lie: “Retail sales over the holiday weekend were surprisingly strong, up XX percent from last year. This bodes well for the upcoming holiday shopping season.”
If this were written accurately, it would instead read something like this: “We don’t know how strong Black Friday Sales were just yet, and wont for a few days. We don’t know how this holiday retail season will stack up against last year’s; we certainly haven’t the foggiest clue as to how the rest of the holiday season will go.”
This has been a pet peeve of mine for too many years to count; see the “previously” list at end.
There are several perpetrators of this annual fraud, but the biggest one is the National Retail Federation. Each year, it commissions a Holiday Consumer Intentions and Actions Survey. It is, at best, utterly worthless; at worst, it is a misleading, money-losing slice of PR propaganda, mindlessly parroted by lazy journalists who should be required to have the word “innumerate” tattooed on their collective foreheads. Or, if their religions do not allow tattoos, then their resumes.
Why is the annual exercise worthless?
Simply stated, the methodology employed by the NRF survey is defective. What happens is that people are stopped heading into a mall, asked how much they spent last year, and how much they plan on spending this year. That increase is how much of the press will misreport sales for the upcoming holiday season.
Why is this defective? The surveys bear no correlation relative to actual future retail sales. The conclusions reached (and repeated ad nauseum) are not supported by the data.
There are several reasons for this: First, people have no idea what they spent last year. No clue whatsoever. A surveyor stops someone on the way into a mall or other retail locale, asks them a few questions, the answers to which range between wild guesses and complete fabrications.
If you doubt what I am telling you, write down in the next 30 seconds what you personally spent last holiday season on all gift purchases. Note that I have given you about 25 seconds longer than most people spend coming up with an answer to the survey questions. Now take a look at your checking account, credit card and Amex statements for November and December. How close did you come? Yeah, I thought so.
Now you know the baseline number is off considerably. Let’s look at the next step: Asking people to forecast their own spending. There is a treasure trove of academic research on the subject, which is incontrovertible. It proves beyond any doubt that You Humans have no idea what you will do in the future. Forget forecasting gross domestic product or nonfarm payrolls next year, shoppers have no idea what they are going to spend next week, let alone the holiday season.
Why is this? We have learned through our study of human psychology that surveys actually query what people believe they will do. In other words, what you learn is what it is they imagine their future behavior might be. History repeatedly teaches us there is no correlation between our expectations and our actual actions. If you doubt that, consider the annual resolutions made each January: We all want to stop smoking, lose weight, save more for retirement, get in shape. Go to any gym and see how busy treadmills and exercycles are each January. By mid-February, they are forlorn and lonely exercise machines. That reflects the chasm between intentions and action.
Indeed, that’s how we see this play out in the real world. The track records of these surveys are awful. In 2005, the NRF forecast a 22 percent increase in holiday shopping gains for the Thanksgiving weekend. Full holiday retail sales were up just 1 percent. In 2006, it was 18.9 percent sales increase, versus less than 5 percent actual gains. In 2007, a 4 percent gain was actually a 0.4 percent drop. NRF forecasts for 2008 were even worse, 2.2 percent sales gain versus a drop of 6 percent.
But nothing compares to the NRF’s 2009 Holiday Consumer Intentions and Actions Survey for holiday shopping — it forecast a stunning 43 percent fall versus actual sales, which were up about 3 percent.
All told, this exercise a poorly conceived act of PR frippery, with no correlation to actual retail sales, and even less to corporate profits. Journalists should explain it intelligently, explaining how little these surveys actually correlate to increase in sales.
Investors who don’t enjoy losing money should ignore the media coverage of these misleading, inaccurate surveys with extreme prejudice.
Did Black Friday save the season? Beware the retail hype. (Washington Post, Dec. 4, 2011)
Retail Sales Disappoint on False Black Friday Reports (Dec. 13th, 2011)
No, Black Friday Sales Were Not Up 16% (not even 6%) (Nov. 28th, 2011)
Entering the Holiday Shopping Season (Beware Surveys!) (Oct. 28th, 2009)
Spinning Black Friday Retail Sales (Dec. 1, 2008)
More Bad Data from the NRF? (Nov. 2006)
Holiday Sales Numbers Don’t Add Up (Dec. 1, 2005)
Jay-Z faces pressure to end his partnership with Barneys over racial profiling, but Larry Wilmore sees selling out as a sign of progress. Shopping While Black The Daily Show Get More: Daily Show Full Episodes,The Daily Show on Facebook TDS, November 6, 2013 (06:45)
Excerpt “According to Nielsen, from data provided by managers at Nielsen SoundScan, which collects recorded-music sales information, of the eight million unique digital tracks sold in 2011 (the large majority for $0.99 or $1.29 through the iTunes Store), 94 percent – 7.5 million tracks – sold fewer than one hundred units, and an astonishing 32…Read More
Fruits of Passion Click for interactive chart Valuables Source: Economist I love that classic car investing has trounced Art, Coins, Wine and Equities !
Category: Consumer Spending
click for ginormous graphic Source: WSJ I love this giant graphic from this morning’s WSJ — it gives us the 30,000 foot view of consumer debt here in the USA. Despite low rates — or is it because of them? — American consumers have seen their debt loads fall to the lowest levels…Read More
Click to enlarge Once again, its time to peruse the data to see which books TBP readers bought last month. Amazon’s embed code lets me track every click from these links — how many people look at the page, how many books get seen, and/or collectively purchased. Its anonymous — I don’t know who bought…Read More
@TBPInvictus Below I give you two related (and therefore similar) measures of household leverage: Household Debt Service Payments and Household Financial Obligations, each as a Percent of Disposable Personal Income: Each has hit a record or near-record low for the maximum observable period (regrettably only 33 or so years). The question must be asked: Is…Read More
I have to direct your attention this morning to a monster piece in Tampa Bay Times titled: America’s Worst Charities.
Aside from the obvious Pulitzer Prize potential, the series is a fantastic look at the massive waste of money – donated in good faith by people who have reasonable expectations that the cash would actually do some good to people in need. Instead, the worst charities are simply treadmills, raising more money to apply it to the not very important business of raising more money.
The finance industry has deep ties to the world of philanthropy (aka charity industry), as wealthy clients very often engage in major “gifting.” Foundations and donations are a major part of tax and estate planning.
As the series makes clear, intelligent philanthropy is much harder than it looks. I always advise that before writing a check, you do your homework. Start with GiveWell and Charity Navigator (also check out Evaluating the Charity Evaluators). Focus on what actually helps people, rather than poorly run, self-interested shops that are borderline scams. (Also, check your ego and avoid trying to have a building with your name on the side of it).
And for heaven’s sake, stop giving money to outfits that pocket 90% of the donations, leaving little or no aid for its intended purpose.
Click to enlarge
Source: Tampa Bay Times