Retail
For the world’s retailers, and especially those with sales principally in developed economies, this environment is challenging, to say the least. High food and energy prices have caused consumers to shift away from non-food and non-fuel products. Consumer spending on durable products has, consequently, been very weak. To the extent that spending is growing at all, consumers are becoming more price sensitive. After many years of rising market share for discount retailers, consumers are increasingly expecting low prices even for relatively high quality merchandise. Also, tightened credit market conditions have made it difficult for retailers to finance mergers and acquisitions (M&A). This means that some vulnerable retailers may simply perish instead of being acquired. All of this is occurring against a backdrop of increased governmental calls for heightened regulation and transparency.
Retailers traditionally are hit hard by economic downturns because of the immediate effect of consumer spending. On the other hand, they are traditionally late in recovering when overall economy does. Our proposed way forward for retailers involves both a careful review and assessment of current processes and ways of doing business as well as bold action to make the most of the advantages a weak market can afford.
To survive, and even thrive, in today’s increasingly complex and uncertain world, retailers need to build business models that are more responsive, adaptable, and efficient with resources and assets. Consumers will be intensely value-oriented, even more so than in the recent past. We are seeing this already with consumers shifting to more price-focused retailers. For all retailers, this environment will require added attention to keeping costs under control. Top-line growth, however, will require something altogether different. Retailers will gain market share only if they are clearly differentiated from competitors, possess strong brand equity, have the ability to innovate in order to maintain differentiation, and offer a customer experience that excites consumers.
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