1977: Retail Business | As they saw it

Highlights.

Old retail firms continued to make news headlines, some upbeat, some not so heartening. The J. C. Penney Company Inc., one of the largest of all U.S. retail chains and a true merchandising success story, celebrated its 75th birthday in 1977. Founded in Kemmerer, Wyo., by James Cash Penney, with an investment of $2,000, the company has grown from a single 25-by-40-foot store in a small frame building into a huge department store-and-catalog chain of over 2,000 units, with annual sales of more than $8 billion.

In depressing contrast to the J. C. Penney story, United Merchants and Manufacturers Inc. padlocked its 36-state, 366-store Robert Hall Clothes division this year and auctioned off the inventory. Competition from discount stores and domestic production difficulties were cited as reasons for losses of $100 million over the last three years in the retail chain operation.

In another retailing demise, Lit Bros. Inc., one of Philadelphia?s oldest and largest department stores, finally closed its doors in April. The move was a shock to city planners, who had accorded Lit Bros. and Strawbridge and Clothier the role of commercial anchor at one end of Market Street East, a key street in Philadelphia?s downtown rebuilding program. In retrospect, Lit?s seemed ordained for failure. Housed, like so many other downtown department stores, in an ancient complex of decrepit buildings, with floor areas broken into odd shapes and sizes on many levels, it proved unduly costly to maintain and operate and unattractive to modern-day consumers in a hurry.

The New York City area also lost major retail outlets this year. (There were 26 Robert Hall stores in the New York City metropolitan area alone.) S. H. Kress and Company closed its 65,000-square-foot flagship store at Fifth Avenue and 39th Street, one of the oldest and largest variety stores in operation in Manhattan. And R. H. Macy and Company Inc. shut down its 30-year-old Jamaica, N.Y., store in November. The same month Abercrombie and Fitch, the exclusive specialty store, closed its doors.

Among other retailing events of interest was the decision of Gimbel Bros. Inc. to close up its decades-old corporate buying office and shift the function to an independent office. The decision left Gimbels as the first chain with annual sales of over $500 million that did not have its own corporate buying office. Also, Carter Hawley Hale Stores Inc., a Los Angeles?based chain, announced plans to sell its $67.7 million investment?a 20.5 percent interest?in the House of Fraser Ltd., the largest British retailer, to Lonrho Ltd., a British company that is partly Arab-owned.

Downtown shopping malls.

With increasing frequency, blighted urban downtown areas are being converted into shopping malls. In Portland, Ore., for example, a 15-block section is being revitalized with modern stores, wide sidewalks, special bus lanes, and attractive passenger shelters. Baltimore is turning decaying inner-city areas into pleasant pedestrian malls; there are plans at present for a $210 million Lexington Square Mall and a $25 million downtown people-mover. New York City is considering reserving parts of Fifth Avenue and Wall Street and some entire residential neighborhoods as pedestrian precincts. Complementing the urban pedestrian malls is a growing tendency toward the installation of retail complexes on the ground floors of downtown office buildings, to attract business from office workers. In New York City, for example, the Citicorp Center, a 59-story building covering almost an entire mid-Manhattan block, includes a six-story wing designed specifically for retail occupancy.

Retailing in the economy.

The many contributions to the national economy of retailing are all too often downgraded or nearly ignored by observers, but statistics show that the role of the retailing industry is substantial. From 1954 to 1972, retailers invested huge sums of money to renovate old stores and to build and stock roughly 200,000 new retail outlets. From 1950 to 1974, retailers added about 3 million new jobs to their work force and more than quadrupled their contribution to the national income.

Retail sales.

January?July 1977 retail sales were $410.3 billion, a $38.5 billion (10 percent) gain over sales for the same months of 1976. Of the component sales groups, automotive sales made the best relative gain, posting $11.8 billion (16 percent) more than for the same months in 1976. Only the variety stores group failed to either equal or exceed its 1976 sales total in the January?July period. Groups bettering their January?July 1976 sales with substantial gains in 1977 included building materials, hardware and farm equipment, department stores, and nonstore retailers.

Apparel sales.

January?July 1977 apparel sales were disappointing, registering only a 4 percent sales gain over the January?July 1976 level. Women?s apparel and accessories registered a surprising 2 percent drop in sales, the only apparel group that failed to match its January?July 1976 dollar sales total in 1977.

Chain stores.

In 1977, chain store sales for January?July were 9 percent higher than those for the same months of 1976, a full percentage point below the gain reported by retailing overall. Encouragingly, major chain stores across the United States reported sharp September sales increases this year over last year.

Automotive sales.

January?July automotive dollar sales were 16 percent higher in 1977 than in 1976. Through August of this year, new car unit sales totaled 6,194,581, as compared with 5,816,705 in 1976, an increase of 6.5 percent. The General Motors Corporation and the Ford Motor Company enlarged both their absolute and their relative shares of the market during 1977, while the Chrysler Corporation and the American Motors Corporation suffered losses in each category.

This year has seen a sharp reversal of last year?s downtrend in foreign-car unit sales in the United States. January?August foreign car unit sales totaled 1,457,606 in 1977, as against 977,377 in 1976, or 49 percent more. In addition, foreign manufacturers boosted their truck sales from 153,391 units in 1976 to 228,901 units in 1977, representing a gain of 49 percent again. It was estimated that Americans bought another 170,000 foreign cars in September 1977, while their purchases of American-made cars slumped 6.7 percent below the September 1976 level. If sales of foreign cars, oriented toward energy thrift, continue at their present growth rate, they may win 20 percent of the U.S. market.

Retail inventories.

May 1977 retail inventories were $87 billion, or 11 percent, higher than the May 1976 total of $78 billion. Durable goods accounted for $47 billion of the May 1977 total, and 53 percent of the increase; nondurable goods accounted for $40 billion, and 47 percent of the increase. The greater increase in durable goods inventories compared with nondurables, both in absolute and in relative terms, can be credited to the higher rate of sales generated by the former during the early part of the year. Both durable goods and nondurable goods enjoyed reduced inventory-sales ratios at the end of May this year, compared with the same period last year. The durable goods inventory-sales ratio relative decrease, however, was four times that for nondurable goods.

Personal consumption expenditures.

At the end of the second quarter of 1977, U.S. consumers were spending at an annual rate of $1,194 billion, an increase of $115.6 billion, or 10.7 percent, over the $1,078.4 billion annual rate at which they were spending during the same period last year. Their expenditures for services in the second quarter of 1977 were running at the annual rate of $539.6 billion, or 45 percent of their total annual expenditures. With growing public pressures for shorter work weeks and an expanding interest in sports, travel, and other leisure activities, consumers may soon spend more for services than for goods.

Consumer credit.

If outstanding installment credit is used as a criterion, going into debt seems to have become an accepted way of life for many Americans. At the end of May of this year, consumer debt totaled $185,280 million, which is $21,179 million, or 13 percent, more than at the end of May of last year. During 1977, Americans seemed to increase their borrowing especially sharply for automobiles and for bank credit card purchases. While commercial banks hold the largest share of consumer debt, consumer unions are increasing their share more rapidly than any other type of holder.

Prospects.

Retail sales should total around $717 billion for all of 1977. With inflation continuing, it is unlikely that retail unit sales gains in 1977 will match their 1976 level of between 5 percent and 6 percent.

Retailers? problems are not fading away. Sales productivity, for instance, is a long-standing problem. Despite rapidly increasing store construction, maintenance, and operating costs, there is evidence that many retailers are using their space less productively today than in earlier years. According to data compiled by the National Retail Merchants Association, the average department store produced $97 in sales per square foot of selling space in 1950, compared with only $92 per square foot in 1975. When adjustments are made to take account of the decline in purchasing power over these years, it appears that actual dollar productivity per square foot of selling space of the average department store retailer fell by almost 60 percent from 1950 to 1975. This loss in space productivity accounts in part for the need of retailers to raise markup prices.

Consumerism is likely to provide retailers with ever increasing problems. An omnibus credit card and electronic-banking consumer protection measure is presently being considered by a U.S. House committee. There is continuing government effort to protect consumers from hazardous and shoddy merchandise. Finally, there is the study of retail markups on textile and apparel imports made by the Library of Congress Congressional Research Service at the request of the House Ways and Means Committee. The study concludes that low-cost imports do not result in any price benefit to the consumer but simply allow retailers to take bigger markups than they are able to on apparel made in the United States.

Advertising

U.S. advertising volume continued to expand at an accelerated rate this year. Preliminary figures prepared for Advertising Age by Robert J. Coen, vice-president for research at McCann-Erickson Inc., indicated that total expenditures would reach a record level of $37 billion, exceeding the 1976 figure by more than 12.5 percent. The growth reflected, in part, a continued effort on the part of business firms to expand sales volume despite indications that the pace of economic recovery was leveling off during the latter part of the year. The growth also reflected additional rate increases by the advertising media?particularly television?following substantial cost increases in 1976.

New FTC chairman.

Michael Pertschuk, former chief counsel for the Senate Commerce Committee, was nominated and confirmed as chairman of the Federal Trade Commission (FTC). He succeeded Calvin Collier, who continued as a member of the commission. Pertschuk, who took office in April, promised a more aggressive stance for the FTC. His priorities were correction of abuses in children?s advertising and protection of ?vulnerable? groups (the aged, the poor, and the non?English-speaking).

Advertising and free speech.

A 1976 Supreme Court decision on drug advertising, which for the first time clearly extended a degree of First Amendment protection to ?commercial speech,? had repercussions on advertising curbs by other professional groups this year. In a case challenging the antiadvertising rules enforced by the Arizona Bar Association, the Supreme Court, in a 5-4 decision on June 27, held that lawyers could not be prohibited from advertising their fees for specific, routine legal services. The Court agreed, however, that bar associations may continue to regulate the ?time, place, and manner of advertising of legal services.? Following this decision, the FTC in September began hearings on the restraints placed upon members? advertising by the American Medical Association.

Comparative advertising.

FTC encouragement of direct product comparisons, on the grounds that they provide more helpful information to the consumer (and presumably stimulate competition), produced various examples of advertisements in which one brand was pitted directly against another with (it often seemed) no holds barred. In the wake of the bitter Datril-Tylenol confrontation in 1976, a wider dispute broke out this year, involving Johnson & Johnson (manufacturers of Tylenol) and two competitors: American Home Products (Anacin) and Sterling Drug (Bayer Aspirin). In their advertising, American Home Products and Sterling Drug made direct comparisons between their products and Tylenol, claiming that the acetaminophen ingredient of Tylenol was potentially harmful and also less effective than aspirin as an anti-inflammatory agent. On August 18, Johnson & Johnson secured a federal district court injunction against continued use of the Anacin ads and threatened similar action against Sterling Drug.

Meanwhile, controversy continued among advertising industry leaders on the effectiveness of comparative advertising. Some spokesmen contended that the approach only served to create confusion in the minds of prospective purchasers. Others argued that comparative advertising made messages more pointed and informative by allowing them to stress specific product attributes instead of emphasizing such intangibles as the glamour or romance associated with the product.

Media.

Television advertising volume continued to grow at a rapid pace. Network television, augmented by additional price rises, showed about a 20 percent gain in dollar expenditures during the year, although the amount of commercial time did not increase significantly from 1976. Time purchased from individual stations grew rather slowly, influenced in part by shifts of funds by some advertisers to meet the higher costs of maintaining network schedules.

The escalating costs of network time over the past two years, coupled with the continuing scarcity of available network time (which was sold out well in advance for most time periods), led to increased discussion about the desirability of a fourth network. With the advertising firm of Ogilvy & Mather acting as a catalyst, two companies?Paramount and Metromedia?announced during the year that they were organizing programming for such a venture. Metromedia abandoned the idea, but Paramount went ahead with plans for two projects (a Saturday night movie and a new Star Trek series) to be aired in 1978.

In May the Federal Communications Commission (FCC) ruled that broadcast stations do not have to give political candidates the same access to air time as they give commercial advertisers. The ruling reversed recent FCC interpretations of the Federal Communications Act, in effect during the 1976 election.

Magazines continued the advertising upsurge that began in 1976, showing an increase of around 20 percent for the second year in a row. There seemed to be a revival in usage of magazines by many national advertisers?perhaps in part because magazine rates were increasing more slowly than those of most other media. Newspapers and radio also showed substantial gains in volume during the year.

In August the FTC filed a complaint against the Los Angeles Times for alleged price discrimination, because it offered cumulative-quantity (?bulk?) discounts to advertisers. The FTC contended that the discounts illegally discriminated in favor of advertisers purchasing a higher quantity of lines during a contract year. The action caused considerable concern in newspaper advertising circles and among large retail newspaper advertisers, since the bulk discount is an almost universal element in newspaper retail advertising rates.

Agencies.

According to figures compiled by Advertising Age, J. Walter Thompson was again the largest U.S. agency in total world billings during 1976. Dentsu Advertising of Japan continued to be the overall leader in world billings, but the other nine of the top ten firms were American. Five of the nine had greater billings outside the country than at home, suggesting the continued deep involvement of U.S. agencies in the international advertising scene.

The annual report of the American Association of Advertising Agencies, released in August, indicated that agency profits reached their highest levels in ten years during 1976. Net profit after taxes for incorporated agencies averaged 4.52 percent of gross income, again the highest figure recorded since 1966 (when net profit was 4.98 percent of gross income). Net profit as a percentage of total agency billings rose from 0.77 percent in 1975 to 0.97 percent in 1976. Part of the gain was attributed to sharp rises in television and newspaper rates, which increased agency commissions faster than operating costs rose. Financial reports of publicly held agencies for the first half of this year indicated that the profitability trend was continuing, as client spending kept up at high levels and agency cost controls instituted several years earlier during the cost-price squeeze were still proving effective.

The switch of the $40 million Datsun account from Parker Advertising to William Esty Company created considerable talk in the industry this year, primarily because of the way in which it was handled. Datsun engaged the services of a New York consulting firm?Carter, Achenbaum, and Heekin?to assist in the selection of a new agency; a lengthy screening process then narrowed down the choice to three firms, which were asked to make complete presentations in terms of specific problems outlined by the consultants. One of the finalists, Grey Advertising, dropped out of contention with a charge that the consulting firm was prejudiced in favor of another finalist?Wells, Rich, Greene?by whom the consultants had been retained in the past. According to Nissan Motors, Datsun?s manufacturers, the final choice of Esty over Wells, Rich, Greene was made strictly on the basis of presentations. However, the use of a private consulting firm to make this type of decision raised questions in many minds.

Source: http://astheysawit.com/12722-1977-retail-business.html?utm_source=rss&utm_medium=rss&utm_campaign=1977-retail-business

robert johnson oklahoma city bombing south africa amy wine house amy wine house primetime george michael