Magazines Archives - 2008 December

Retailers need new tactics to weather economic storm
Story 9 - News

RETAILERS need to be able to adapt quickly to changing consumer-spending habits and conserve cash to weather the global economic storm, consultancy firm Deloitte Touche Tohmatsu said.

In a recently-published study prompted by the global economic slowdown following the US economic
crash, Deloitte reported: “Retailers in many countries are facing what might be called ‘a perfect storm’ of negative economic trends for the world’s retailers, especially those with sales principally in developed economies, this environment is challenging to say the least.”

Difficulties are rife, the report said. What happens in the US, which has been struggling with troubles stemming from its housing-sector woes and, more recently, the crash in its financial and stock markets, affects other economies because of its “traditional role” as an engine of global growth, Deloitte stated.

Added to this, commodity prices “are now running amok” and weak credit market conditions have made it difficult for retailers to finance mergers and acquisitions, it said.

“Perhaps, the single most important thing for any retailer or consumerdriven business to do is think and act for your customer. But customer values and behaviours often change dramatically
during a downturn and, as such, need to be re-evaluated,” the consultancy firm recommended, adding that consumers could trade down to offset other changes in their planned spending.

Retailers should, among other things, understand shifts in supply and demand; evaluate their product mix and pricing strategies; find out which products are cyclical in nature; and consider which features consumers value the least.

Maintaining that streamlining business processes to conserve cash should help retailers, Deloitte suggested shortening order-to-delivery times to lower risk and capital exposure; re-evaluating
capital expenditures; examining opportunities to improve cash flow; and taking advantage of regulatory tax provisions that allow for income deferrals.

Look at variable costs:
The research firm also advised against automatically reducing overheads, encouraging companies to look at variable costs instead and consider negotiating with manufacturers for favourable sourcing prices. It also proposed restructuring to consolidate redundant support functions, reduce the layers between management and customers, and identify which divisions share services.

Noting that “restructuring is never easy, but can be easier .... during a challenging period”, Deloitte called for this to be done before it becomes a must-do, “and in ways that reduce disruptions to the business”.

Other suggestions included negotiating to lower costs, with suppliers evaluating the competitive landscape; re-examining the supply chain and watching out for shrink, which increases during depressed times; being on the lookout for fire-sales; and upgrading the workforce.

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