Gift cards
are a huge profit center for many retail businesses. Why? Well, many people
receive them and then completely forget to use them. Just the other day I was
going through a box while moving my office and found not one, but two Starbucks
gift cards. I have no idea if they are still valid, but I'll certainly be
checking the situation out!
This year,
there is another reason to get out and use those gift cards quickly.
Unfortunately, the issue is not simply forgetting about them or losing them
down in the bottom of some drawer. Instead, it has to do with the nature of the
retail business in 2008.
As you know,
we are having massive economic problems. There is no longer a debate that we
are in a bad recession. Some people are even mentioning the "GD"
words [Great Depression"], but we have to hope that they are just
guessing. Regardless, the one thing that is clear is people are scared and they
are holding on to their money.
All
indications are the holiday shopping season has been a bad one for retailers.
With people spending less, retailers simply are not bringing in their
forecasted revenues. This is really bad news since most retailers live on the
knife's edge when it comes to profitability. We've already seen companies like
Mervyns, KB Toys and Sharper Image file bankruptcy. As we head into January, it
is expected that many more retailers will be joining them.
When a
business goes bankrupt, it can shoot for two options. One is to liquidate,
which means it closes the doors forever. The second is to
"reorganize", often called a Chapter 11 bankruptcy filing, in which
the business continues to function while a judge tries to figure out a way to
deal with debtors behind the scenes.
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