A state-wide survey taken last month by the West Virginia University College of Business and Economics indicates most state retailers think sales wont be affected by a recent 1 percent reduction in sales tax on food, and most said the tax should be eliminated altogether.
The survey showed that 82 percent of respondents think the sales tax change will have no affect, and 68 percent believe the food tax should be eliminated.
Interestingly, non-grocery retailers are more predisposed to a complete rollback of the sales tax on food, 73 percent, than are grocers, 25 percent,said Professor James Brown, the colleges KMart Corp. chair of marketing.However, grocery retailers seem conflicted on this issue, with 38 percent saying this tax shouldnt be completely dropped and an equal percentage who offered no opinion on this issue. Clearly, the retail community is divided on this topic, and some grocers have not made up their minds. I think when the sales tax rollback is actually implemented, the �€~fence sitterswill move one way or another.
The survey of 79 local, regional and national retailers doing business throughout West Virginia also showed they had roughly similar outlooks for 2005s holiday season. Roughly 36 percent forecasted their 2005 holiday sales to be similar to those for 2004. In contrast 29 percent felt their sales this holiday season would be higher than last year, while 34 percent thought their holiday sales would be lower this year.
Those who are optimistic about holiday sales said that they were already experiencing increased sales prior to the traditional Black Friday (Friday after Thanksgiving) start of the Christmas sales season. Retailers who foresee no increase or decrease in their holiday sales over last year cite the nature of their business as the reason for this. Their lines of trade (e.g., tires, hardware, automotive parts) typically do not experience the holiday sales surge.
Disappointing pre-Thanksgiving sales trends drove the more pessimistic retailersview of the holiday season. Some also cited the dramatic upswing in gasoline prices during the past several months. Within the sample, 57 percent indicated that gasoline price increases had a noticeable effect on their business, while another 19 percent said that they only had somewhat of an effect. The balance (24 percent) felt the gasoline price increases had no effect on their business.
Also in the study:
- West Virginia electronics and appliance retailers expected their 2005 holiday sales to be the same as in 2004, even with the newer and less expensive electronic gear such as xBoxes, iPods, MP3 players, GPS systems and feature-laden cell phones. The forecast for flat sales may be because the same dollar will buy more electronics in 2005 than in 2004. It may also be because of competition from other retail formats such as Internet retailers (e.g., eBay, buy.com) and general merchandise retailers (e.g., Wal-Mart).
- West Virginia general merchandise retailers are also predicting their 2005 holiday sales to be similar to last year’s. As previously noted, West Virginia department store retailers are forecasting increased sales. This seems counter to the national picture as reported in The Wall Street Journal. That report suggests that, nationally, department stores are suffering at the hands of discounters such as Wal-Mart and Costco and specialty stores such as Abercrombie and Ann Taylor.
Apparently, West Virginia retailers believe that their customers are feeling more flush this year than last and will transfer some of their spending from the cheaper general merchandise retailers (for example, Dollar General and Kmart) to the more expensive department stores. Curiously, West Virginia clothing retailers expect to take a hit this year, seemingly at the hands of the department stores. More aggressive pricing and promotion by department stores in West Virginia may account for this. All of this suggests that West Virginia retailers expect their consumers to buck the national trend this holiday season, as compared to the last, by shopping more at department stores, less at specialty shops, and about the same at general merchandise retailers.
The telephone survey of 79 local, regional, and national retailers doing business throughout West Virginia is part of the Bureau of Business and Economic Researchs quarterly newsletter, which is available free atwww.bber.wvu.edu.