Career Testing
Career Testing
Career Testing
SALARIES / FEB. 26, 2014
version 3, draft 3

Gap Wages Are Up But Retail Sales Look Bad

Gap Increases Wages But Retail Looks Bad

Retail has suffered a poor quarter. The disappointing sales were not confined to US shores. They also extended to Britain and Europe. Both sides of the Atlantic have had a rocky end to the year. The last couple of months’ sales look weak, when compared to last year’s retail figures. The bad weather and low consumer confidence have contributed to poor sales into January and February. This comes as bad news to graduates, who are already struggling to find work. 

Walmart Revenue Loss

The Office of National Statistics in London announced that UK sales experienced their biggest drop in over two years from December to January. While the UK economy is looking stronger and inflation is low, wages are not growing. Simply put, consumers are not spending.

It is a very similar story in America. However, unemployment is a bit trickier in light of recent unemployment benefit cuts. It’s no surprise that discount retailer, Walmart has been hit hardest by these changes.

Poor holiday sales were the least of the retailer’s problems. Cuts to federal programs, higher taxes and the ever rising cost of healthcare all affected its performance. It announced a 20 percent drop in the last quarter, which included the festive period. This was compared to the same period in 2012.

Food Stamps Cuts

Spending cuts to programs like Supplemental Nutrition Assistance hit the discount chain hard. It is estimated that around 20 percent of its customer base use food stamps. Government data backed up Walmart’s generally pessimistic outlook for 2014, showing that retail sales preformed much worse than expected.

Economist link this poor performance with America’s workforce, which many argue has not bounced back. Jobs have remained a tricky issue along with wage growth. Although people feel more optimistic about the economy, there is not enough money to spend. To make matters worse, unemployment benefits were cut at the end of 2013, putting additional pressure on households.

So, what does all of this mean for America’s future? Poor sales will force retailers to cut jobs and automate more services. While this is good for technology, it is not so great for graduates, who desperately need jobs.

The Appeal of E-commerce

One way to deal with the downturn in consumer spending is for retailers to focus on e-commerce. E-commerce allows for more automated services and gives consumers wider access to products. Best of all, it is not weather dependent . With the exception of logistics, consumers can happily shop from home in the most extreme weather conditions. E-commerce also has the potential to lower operational and customer service costs. E-commerce is an excellent future career for future graduates. 

Walmart intends to focus increasingly on e-commerce to grow the business and make up for government spending cuts. It will also focus on mobile applications. The new strategy includes a roll-out of smaller US stores.

Although the retailer’s takings were down 21percent lower than last year’s takings, the chain seems confident about their future strategy. Share prices were down this week to $1.44. This was on top of national meat recalls Walmart issued after it was discovered some of its Rancho products were sourced from beef that potentially originated from diseased or unsound animals 

Gap Wage Increases

There was some good news for graduates amongst all the bad.

The US clothes retailer, Gap took the decision to increase wages to $9 an hour and will aim for $10 next year in line with the new legislation being proposed in Congress. Hopefully, this will be a step forward in the debate about low wages and increase consumer confidence. 

Sources

Washington Post

Bloomberg News

New York Times

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