Brace yourself. For those retailers struggling in today’s economy, next year could be even more challenging, according to new forecasts from TNS Retail Forward. As part of the retail consulting firm’s 2008 Strategic Outlook Conference series, Senior VP Lois Huff presented a sobering outlook for the retail industry that the declining retail sales will continue next year and aren’t expected to rebound until 2010.
Driven by the plummeting values of the housing market and the aftershocks of the recent financial market meltdown, Huff pointed out that the ensuing economic drag will result in a mode of “cautionary consumption” during this holiday season and extending through 2009 before the retail market bottoms out.
Given the continued slump in discretionary spending, Huff projected that more retailers will “run out of runway” in 2009, resulting in further store closings, bankruptcies and liquidations. While Huff pointed out that many retailers will respond to the downturn by scaling back their payroll and closing even more stores, she predicted that the retailers need to prepare their strategies for when the retail industry comes out of this downturn in 2010.
Although Huff predicted there will be some pent-up demand once the economy starts to rebound, she cautioned that “demand won’t be matched by spending power” due to a tighter credit crunch. These factors will result in an “uneven rebound” at retail, with e-commerce and value formats positioned to benefit most, while mass merchants and department stores continuing to lose ground.
In preparing a game plan to win in the world of retail, Huff stressed that long-term success “requires improving competitive position,” which can be achieved by finding opportunities amid the challenges and making investments to gain strategic advantage.
NEXT WAVE OF RETAIL
One of the key investments retailers will need to make in order to have long-term success will be expanding their multi-channel presence. Mary Brett Whitfield, Senior VP of TNS Retail Forward, pointed out that major retailers including Best Buy, Macy’s, Kohl’s, Saks and Neiman Marcus have seen online sales growth of 20% or higher help to mitigate flat to declining brick and mortar sales.
However, Whitfield suggested that the old definition of being a multi-channel retailer simply meant having a presence with stores, catalog and online. However, the new world of multi-channel retailing requires “a bigger, broader brand presence…including new communications channels and touchpoints…some of which also are sales channels,” Whitfield said.
In establishing best practices for multi-channel retailing, Whitfield stressed that retailers be “channel agnostic” and participate in all relevant channels, and make information portable to allow shoppers to share information on multiple platforms.
In addition to expanding a multi-channel presence, TNS Senior VP James Marstiller offered a glimpse at some of the strategies which are currently working in retail, including:
- store brands
- and an overarching focus on value
Moving forward, in order to win in the brave new world, Marstiller suggested retailers “rethink competition” and rethink alliances as win-win opportunities. He also suggested a renewed focus on CRM, by developing best-in-class loyalty programs which leverage shopper insights to “enable segmentation and create value beyond discounts.”