Mid-recession binge lifts retail sales temporarily

http://www.financialpost.com/news-sectors/economy/story.html?id=1409580

Summary

During January, there was the biggest rise in sales ever since July 2006, in Canada. This noteworthy rise doesn’t mean the trend will still follow. The population was just stocking up on cheap Christmas goodies, rather than having increased confidence in shopping. Consumers are shopping for their necessities mostly. Food retailers are doing better than the other retailers like clothing. A lot of the businesses have to change their prices and inventories to follow along with the recession. Businesses dealing with auto parts are doing fairly well. As for furniture, home electronics, and buildings, these retailers are having a hard time getting through this economy recession.

Connection

This article relates to both Chapter 11 and Chapter 15. First of all, Chapter 11 is about merchandising businesses. A merchandising business is a business that buys goods and sells them at a profit. In our article, it talks about retailers, which are merchandising businesses, struggling through the recession. Each of these retailers sells merchandise, and the quantity of merchandise on hand is known as merchandise inventory. Due to the poor economy, fewer consumers are spending money, causing the businesses to have a drop in gross profit, and leaving more inventories. Second, this is related to the inventory turnover ratio in Chapter 15. With less cost of goods sold, and more average merchandise inventory, since sales are not going well, the inventory turnovers for companies would be fairly low. With low turnovers, it means that businesses aren’t able to sell and replace its inventories in one year that much.

Reflection

With the fall in the economy, it is understandable that consumers would try to spend less. Nation wide, people are losing jobs, and incomes are disappearing. With less income, there is less money to spend, and then retail sales drop. It is like a cycle. To break this cycle, I think that employers have to stop lying off their employees. If they kept their employees, who are also consumers, then they would have more money to spend. In return, merchandise businesses will not lose sales. Also, I have realized a lot of prices are going up. My mother has been complaining about how expensive the food is now. With increased prices, it is making harder for consumers to purchase products. Hopefully, this recession will end soon.