Articles

What A Year It Promises To Be!

After a marathon ‘Spring’ that has lasted for around a decade, the scenario facing retail this year is low projected growth – perhaps only matching inflation. We have a federal government who believes part of its role is to kill demand in order to tackle inflation independent of monetary policy, while at the same time adding to inflation through a raft of ‘new’ election promised legislative initiatives. This on top of a Reserve Bank that is not going to hang around with the threat of interest rate rises to bring inflation firmly within its target band.

It had to happen.

Plus six percent compound top-line sales growth for an extended period of time was never going continue forever. If not naturally petering out, the regulators and bureaucrats hanging on for the white-knuckle ride were always going to bottle.

So what does this scenario mean for retailers?

If you are a publicly listed company you are already feeling some of the outcome through share price down-grades. Despite good (and in some cases great) trading performances, retail share prices are being hit as investor sentiment turns away from discretionary spending categories. For the good retailers however, this will be short-lived as it is a natural part of the investment cycle. Traders don’t make money unless there is price movement.

The bigger issue is that retail has been like a desert with a lot of rain and good temperatures. It looks fantastic at first glance with all this vibrant colour and new life. But when the desert turns back to its natural state, which plants will survive without an oversupply of water? That’s the retail landscape now.

There are retail operators who have never seen bad times. When retail returns to slow and steady rather than heady, the cracks in poor retailers operations become chasms. Imitators are shown up for what they are. Poor retail practices and sloppy operations melt under the pressure of lower sales and proprietors desperate for cash-flow jump on discounting and cost reduction which only accelerates their decline.

On the other hand, those retailers who know what they are doing will go from strength to strength through this sorting out period, lifting market share and preparing themselves for growth based on cementing customer relationships, driving efficiency and concentrating on the main levers of productivity.

The good survive, but the great prosper in troubled times. It is, after all, how you deal with adversity and confusion that separates leaders from followers.

The next period in retail will see the market – led by customers – decide who will prosper, who will survive and who will fall. But their support begins and ends with the decisions that you as a retailer make. Now is the time to think carefully, to make considered decisions and then to go hard. Confidence is the magnetic force that will unite all your stakeholders to help you achieve the success you will deserve for your clarity of thought and hard work.