Soft Retail

We went to Costco for lunch today. I told Biajee that we would see people buying more consumable products this season and fewer luxurious items. This kind of mix shift will bring gross profit down because the margin on consumables is really low compared with apparrels, furniture and other categories.

We sat there having lunch while watching all the people walk out of the door with their shopping carts. Most people got fewer than 10 items and they were all paper towels, drinks, bread, turkey, snacks and other necessities. Obviously the average spending amount per customer this year is a lot lower than previous years. Costco will definitely have a worse year than before. They even start to promote Black Friday, which has never happened before.

I'm really wondering how Wal-mart is doing. Maybe people will start to shop more at Wal-mart for cheap Christmas gifts. During the 30 minutes we sat in Costco, only one person checked out a 37 inch Vizio TV. Everything else people purchased were must-haves. This will be a gloomy season.