Despite a recent drop in sales for retailers Fred Meyer and Best Buy, the two store chains have weathered the storm and will see rising profits soon, said representatives of the companies at a retail forecast luncheon.
Adaptability was cited by both retailers as a primary reason for the prediction. In Fred Meyer's case, giving customers access to cheaper alternatives to what they may have bought during brighter economic periods, such as roast instead of steak, will keep those customers shopping at their stores.
"We've got to make sure we have the products our customers are looking for," said Troy Harding, Fred Meyer regional operations supervisor in Alaska.
Price deflation has plagued the company in recent years, Harding said, and customers are unwilling to spend money unless forced to, so general merchandise sales suffer.
Both presenters agreed that the permanent fund dividend presents a major boon to Alaska retailers. Although other states experience a growth period during the Christmas season, Alaska retailers experience a sudden boom in sales when the permanent fund dividend hits bank accounts in October, well ahead of the typical Christmas shopping rush, said John Penn, general manager at the Best Buy store on Dimond Boulevard in Anchorage.
The challenge, Penn said, lies in anticipating how much money will be distributed in dividend payments, as demand for the pricier consumer electronics will expand as dividend amounts increase.
The 2008 dividend included the Alaska Resource Rebate of $1,200, pushing the total check that year to $3,269, its highest ever. Penn described the effect it had on the industry as "astronomical," with television sets and computers flying off of store shelves.
Penn doubts this will happen again in 2010. Last year's PFD was $1,305 and he anticipates this year's check will be even lower.
While speaking specifically about the consumer electronics sector of the retail industry, Penn said stores must challenge themselves to adapt to the needs of their customers by showing them how the electronics they buy can simplify their lives.
Adapting to the needs of customers also often means tailoring the services offered at specific locations to the needs of people in that community. Magnolia Home Theater, a "store within a store" found at certain Best Buy locations, offers home theater products and helps with installation. Musical instrument stores can also be found at certain locations, along with stores that sell Apple products like iPods and iPhones.
In terms of the forces that will exert the most influence over the industry this year, Penn pointed to several factors that could swing the pendulum over to the positive or negative side.
Employment looks to favorably influence the industry, he said, as job rates should increase in Anchorage. The release of several new technologies, including Apple's new iPad computer, should also boost sales in the coming months. Penn also said inflation rates have been kept in check recently.
On the flip side, a decrease in tourism looks to limit the number of new customers consumer electronics stores can attract. Meanwhile, rising costs associated with health care and other life essentials means customers have less money to spend on discretionary purchases.
Sean Manget can be reached at sean.manget.@alaskajournal.com.
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