Articles

World Retail 2009 Part 2 – The True State of World Retail Revealed!

Looking back at the cause of the Global Credit Crisis and it’s effect on global retail is a text book case with some difficult lessons to ponder. As with every economic cycle, the assumed nett asset value and corresponding usage of cash-flow to support ballooning credit at both a business and consumer level fueled a bubble that was over-exploited by highly intelligent (and some would argue highly immoral) investment packagers who snared mainstream financial pillar institutions in their net and triggered the collapse of the house of cards they had built.

The collapse of Lehman Brothers in New York in September 2008 capped an already tough year internationally with a domino effect that created a retail tidal wave. Instantly panicking at a cash-register response the following week, Saks dropped store-wide prices by 70%. Everything in the store was dropped by 70% as they attempted to slash inventory levels and as a result, all their competitors were forced to follow suit.

This created ripples right across the northern hemisphere – not just in the U.S.A. – and caused already worried consumers to mistrust the value of goods as the prices of goods appeared to be in free-fall. There was no trust at either a business or a consumer level.

From here retail markets in almost every country suffered – with one of the notable exceptions being Australia which has been (and still is) trading at all-time highs on a same period basis. Amongst this sea of red ink however, there were and still are some notable exceptions.

For every example of a retailer who has cut inventory levels and managed themselves into a reduction of sales and profits, there is another who has done the opposite by understanding how to adapt to the circumstances and show the infectious confidence to seduce customers to spend.

Some of the notable successes around the world at the present time are as wide ranging as Louis Vuitton and Hermes, Porsche, Darty (French electrical retailer), Palacio (Mexican department store) and Apple to name but a few.

What all these retailers have in common is an understanding of how to reinforce value to the customer, how to deliver seductive excitement, the need to focus on the customer’s ownership of the products and how they will use them rather than the transaction and the unfailing confidence never to undermine the price of their goods.

All these retailers are experiencing sales and profit growth and massive market share gain at a time when the actions of many of their competitors are causing the overall decline of their categories. While it is always difficult to pull back from the competitive turmoil you become submerged in, retail has and always will be about adaptation to ensure continued relevance and to put the power of running the business in the hands of its leaders rather than the competitors.

In good times and tough times, global retail winners are head a shoulders above the rest because they run their own race and focus on being the best at what makes them unique and compelling.