Since holiday shopping is about to begin, it\u2019s important to know that consumer spending accounts for about two-thirds of GDP. This demonstrates that American consumers are a powerful force for the economy. However, large retail sectors are seeing shares crash. The occurring situation makes the holiday spending season a must needed event, even though it does not look that positive.<\/p>\n
An article from the Business Insider called Here’s a Simple Explanation for Why the Retail Business is Brutal<\/a> <\/em>went into detail about the recent stock drops in high end retail stores. Macy\u2019s stock fell 14% on November 11th<\/sup> and Nordstrom\u2019s shares were down as much as 16%. Both these company\u2019s earnings widely missed expectations and the future outlook is disappointing.<\/p>\n So why are these drops occurring? Well the retail business is a tough one to maintain and retailers are having to fight harder than ever for their share of consumer dollars this holiday season.<\/p>\n The article also mentioned why retail is a brutal business. \u201cRetail has high fixed costs, high working capital intensity, fickle customers, low barriers to entry,” they wrote, calling the sector a case study for the worst-possible business\u201d. It also mentioned that fixed cost are numerous for retail companies. It has to have the physical space, inventory, personnel, and supply chain to keep the whole system running.<\/p>\n Over time these costs change, usually becoming more expensive. In order to maintain a company profit, it needs to keep moving profits back into the business.<\/p>\n It mainly depends on the consumers and what they want to buy. It could be American Eagle one year and H&M the next.<\/p>\n