Chicago retail sales post biggest drop since 1985

A deep-seated shift in consumer behavior -- spending less and saving more -- means the fallout from 2009 will hover over the retail landscape in Chicago, U.S. for years, according to a report due out next week from a local research company.

Retail sales in the Chicago metropolitan market fell 8.7 percent, to 92.9 billion U.S. dollars, in 2009 from the year before, marking the biggest annual decline since at least 1985, when Chicago-based Melaniphy & Associates Inc. began tracking the figures. The dismal performance follows a 4.8 percent drop in 2008, a record decrease at the time, the report said.

The two consecutive years of record slides have battered local merchants, said John Melaniphy, publisher of the report. Retail growth is unlikely to return until 2012, he said. Many restaurants and shops, hurting from the downturn, probably won't have the stamina to survive another year.

"We are truly in uncharted territory," Chicago tribune quoted Melaniphy as saying. "I haven't seen anything like this before, and the depth of it is startling. I think we're going to see a lot more failures this year because it's not going to recover fast enough for the retailers and restaurants that got whacked badly in 2008 and hit again in 2009."

One hopeful sign occurred at the end of last year, when the pace of the sales decline slowed dramatically, he said. Retail sales in the metropolitan area fell 2.9 percent in the fourth quarter, a significant improvement over the drops of 10.7 percent in the first quarter, 12.1 percent in the second and 9.3 percent in the third.

"We came out of the fourth quarter in better shape then the previous year," said Melaniphy. "But it's going to take a while to recover."

The recession and its aftermath wiped out six years of retail sales gains from the local economy, Melaniphy's analysis found. The last time retail sales were below the 92.9 billion dollars generated in 2009 was 2003, when sales were 90.7 billion dollars.

In another first, all 10 categories measured posted an annual sales decline. In 2008, in contrast, sales of food at grocery stores and sales at restaurants and bars both posted gains.

The city of Chicago, for its part, saw retail sales fall 7.1 percent, to 20.6 billion dollars, last year, the report said.

The restaurant and bar scene, by far the largest retail category in the city, was particularly hard hit as fewer business executives dined out, tourism waned and more people ate at home. Sales at drinking and eating places in the city fell by 270 million dollars, or 5.4 percent, to 4.7 billion dollars.

Meanwhile, the biggest percentage declines in the city occurred in furniture and electronics (down 15 percent), car dealers and gas stations (down 13 percent) and home improvement (down 10 percent.) Apparel and accessories sales, often an attraction for tourists, fell 8.9 percent.

The sales figures in the Melaniphy report are calculated based on recently released sales tax data from the Illinois Department of Revenue. Illinois is one of the few states that makes retail sales tax data public, allowing analysts to get an accurate picture of consumer spending.

Earlier this a month, a report from AlixPartners, a New York- based retail consulting firm, likewise described 2009 as "the most challenging year for merchants in recent memory." The firm interviewed more than 7,700 Americans to come up with a picture of the post-recession consumer mindset, calling the new attitude a " clear-cut shift to thrift" that is driving consumers at all income levels "to seek lower-cost alternatives, compounding the challenge for many retailers."

Similarly, Chicago-based PricewaterhouseCoopers LLP said in its March report that a new era of "practical consumerism" has dawned. Shoppers are starting to get weary of being frugal, but they are more thoughtful about when and where they splurge.

[Source: Xinhua, Chicago, 20Mar10]

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