IT’S 2019. AND WHAT A YEAR IT’S ALREADY BEEN. DIVERSITY ON ONE HAND, DIVISIVENESS ON THE OTHER.
Despite upside-down weather patterns, escalating trade wars, and rough political waters, the economy has been booming. To offer a fresh perspective, a few of the charts presented here compare stats from 2013 with Q1 of this year.
Unemployment is at its lowest point since the end of 1969, and, in most areas, the economy has been in overdrive. The Index of Consumer Sentiment surged in early May to its highest level in 15 years, though numbers released later in the month weren’t so cheery.
So, what about optical? So far, all regions have seen increased sales, with the Midwest experiencing the greatest growth.
As for retail real estate, there’s plenty of open space at malls, as Sears, J.C. Penney, and Macy’s continued closing stores in Q1. The resulting vacancy rate of 9.3% is the highest since 2011. The good news? Regional mall owners are looking for smaller, more nimble tenants, reports Reis.
How is this affecting spending? Despite volatile weather and a soft housing market, the National Retail Federation projects 2019 retail sales will increase between 3.6% and 4.4% to more than $3.8 trillion.
The Conference Board’s Economic Forecast released in May warns, “Consumer spending will pull the U.S. economy through in 2019, but it can’t prevent greater business challenges.” Lower job numbers and tariff talk in late May suggest what some of those challenges may be.
ECP INSIGHT: ON PLATFORMS
“We’re investing in platforms, equipment, and software to give customers what they want when they want it.”
—EB Regional Focus Group Study participant
THE U.S. ECONOMY
From Sea to Shining Sea
The consumer price index (CPI) increased 2% for the 12 months ending in April, thanks to the rising costs of gasoline, medical care, and housing.
—U.S. Bureau of Labor Statistics
HAPPY SO FAR
The economic outlook reached its highest levels since 2004.
—University of Michigan
Through April, Vermont has the lowest unemployment rate (2.2%) and Alaska the highest (6.5%).
—U.S. Bureau of Labor Statistics
UBIQUITOUS SALES GROWTH
Across the million+ retail establishments in the U.S., sales have grown almost 4% annually since 2010.
—National Retail Federation
where tradition meets tomorrow
From forestry and fishing to futuristic urban construction and retail sprawl, the Northeast is a mixed bag in terms of business. For example, while New York state accounts for 8.2% of the nation’s gross domestic product (GDP), no states in the Northeast are on anybody’s list for GDP short-term growth.
In terms of optical, over the last two years, more practices here (42% in Q1 2019) report flat sales than ECPs in any other region. On the other hand, ECPs in the Northeast sell more men’s eyewear and more combination-material frames than their counterparts in other regions.
ECP INSIGHT: ON BATTLING ONLINE SELLERS
“We’re providing excellent customer service by exceeding patient expectations.”
—EB Regional Focus Group Study participant, Northeast region
14% OF ECPs IN THE NORTHEAST SELL PLANO SUNWEAR. THAT’S MORE THAN ANY OTHER REGION BY SEVERAL PERCENTAGE POINTS.
Northeast: The Optical Picture in Focus
Northeast: The Big Picture
JOBS: The region’s unemployment rate of 3.7% in April is its lowest in over a decade. [U.S. Bureau of Labor Statistics]
PRICES: The consumer price index (CPI) has crept back up to 1.7% from a very low 1.3% in February, and though wages and salaries are down a bit from Q4 2018 in the Northeast, they’re still higher than in the other three periods of last year. [U.S. Bureau of Labor Statistics]
REAL ESTATE: The vacancy rate for regional malls was up to 9.3% in Q1, compared with 9% a year ago and 8.4% two years earlier. Strip mall vacancies have remained at 10.2% since Q4 last year, according to Reis Real Estate.
as varied as the terrain
The West region is, indeed, wild. High prices, but stable economies.
The West gets high scores on a lot of counts…some good, some not so great.
For example, though wages and salaries are up 3.5% year over year, Western states have some of the country’s highest jobless rates. Nonetheless, U.S. News & World Report just published a list of the states with the best overall economies. The top five in the nation: Colorado, Utah, Washington, California, and Oregon.
As for eyewear, more practices here have expanded their frame mix to include higher-priced product. They also sell more sunwear and sports eyewear, as well as garner more revenue from prescription lenses, than their peers in other regions.
ECP INSIGHT: ON EXPENSES
“We’re minimizing expenses as much as reasonable and increasing our revenue capture rate.”
—EB Regional Focus Group Study participant, West region
10% OF SALES IN THE WEST COME FROM FASHION SUNWEAR—MORE THAN ANY OTHER REGION.
West: The Optical Picture in Focus
West: The Big Picture
JOBS: Though unemployment numbers are stable at 4.2% so far this year, the West is home to some of the nation’s lowest unemployment (Hawaii, 2.8%) and its highest (Alaska, 6.5%).
PRICES: Thanks mostly to rising gas prices (up 13.6%), the consumer price index here was up 2.9% for the 12 months ending April 30.
REAL ESTATE: San Francisco, Denver, and Seattle are among the top five most competitive markets for office space so far in 2019. And, the average retail rent increased 0.4% year-over-year.
weathering the storm(s)
Rain, rain, go away. It was the wettest winter on record in the U.S., and the South continues to bear much of the brunt of it.
According to Chris Dolce, weather.com senior meteorologist, “This winter ranks among the worst…in the South.” Tenn-essee, Mississippi, and Alabama fared the worst.
One shining star, Raleigh, NC, nonetheless managed to achieve the biggest year-over-year increase in office space revenue. That’s no small feat this year.
And, in optical, consumer preferences continue to evolve. Take frame materials, for example. All-metal frames have dropped here from 21% in 2013 to 6% in Q1 2019, while combination-material designs are at 33%, a 12% jump over 2013.
ECP INSIGHT: ON INSURANCE
“We’re cutting back on which insurance we take and moving to a more patient-pay, concierge model.”
—EB Regional Focus Group Study participant, South region
$1M...THE SOUTH IS HOME TO THE MOST PRACTICES WITH A SINGLE-LOCATION SALES VOLUME OF $1M-$5M.
South: The Optical Picture in Focus
South: The Big Picture
JOBS: Mississippi, West Virginia, and Louisiana are among the eight states with the highest unemployment through April. [Statista]
PRICES: As of April 30, prices in the South are up 0.5% over the month and 1.8% over the year. [Consumer price index]
REAL ESTATE: The South boasts nine of the nation’s 30 top midsized boomtowns, including No. 1…Naples, FL. [CNBC]
from fields to factories
The Midwest is feeling the winds of change. Though a lot of those breezes had been spreading growth in recent quarters, the U.S.-China trade negotiations are causing a lot of indigestion in the Bread Belt. That’s just one factor that, according to the Midwest Economy Index, caused economic growth to begin slowing in March.
It also explains why only 53% of ECPs report YoY sales are up, compared with 81% in 2018, and even 65% in 2013. Somewhat perplexing, more ECPs in the Midwest than elsewhere—34% of those surveyed—report they haven’t revised their frame price point mix.
ECP INSIGHT: ON PROMOTING
“We’re partnering with other local retailers for events and starting digital marketing with targeted cable ads.”
—EB Regional Focus Group Study participant, Midwest region
WHAT’S NEXT FROM A RETAIL PROPERTY PERSPECTIVE IN THE MIDWEST? REIS REAL ESTATE PROJECTION: “GRAY SKIES AHEAD!”
Midwest: The Optical Picture in Focus
Midwest: The Big Picture
JOBS: Bright spots include Wisconsin, which, at 2.8%, boasts one of the lowest unemployment rates in the country. [Federal Reserve Bank of Chicago]
PRICES: Rising gas prices helped push prices up 0.3% in April and 1.5% higher year-over-year. [Consumer Price Index]
REAL ESTATE: Literally all over the map, increased retail vacancies and falling retail rents are a big problem in Milwaukee, for example, while Omaha, NE, has seen a big drop in its retail vacancies, according to Reis Real Estate. The overall projection? “Gray skies ahead.”