Articles

Growing Pains.

Global economic growth is projected to be around the level it is today – the low three per cent range – for an extended period of time. Some say twenty years is not out of the question. The good news is that consensus opinion is ‘growth’ not decline and sustained growth at that. Steady but not heady. The issue is not in the number but in re-setting expectations and therefore behaviours around an era of sustained, steady growth.

Consumers adjust to this better than businesses do – spending what they perceive that can afford. A perception dominated by income levels and personal asset values supporting debt. Most investment behaviour today is still based on boom-bust thinking and the attempt to create boom-bust movement both at an investment level and more importantly for retail, at a business activity level.

This is the heart of retail growing pains. A failure to acknowledge, embrace and adapt to the new growth dynamics which face us in the medium term future.

The fifty-year average growth rate for retail is around four per cent per annum. That is the size of the total pool of available consumer dollars. We sit above that this year at around five per cent on a moving annual turnover basis. If your retail business is achieving five per cent sales dollar growth it is maintaining its share of total retail. On a category basis this position may alter.

However there are very few businesses that I work with that have a growth target of less than five per cent per annum in top line sales. What needs to be acknowledged by those companies is the magnitude of the task you set when you attempt to grow above natural growth. Market share growth today is very hard to achieve. It requires aggression, focus, discipline and innovation.

Simply doing what you have always done doesn’t achieve share growth. And as most markets are mature and most consumer needs already met, the key driver of success revolves around third party collaboration. Most retail businesses – in particular large scale retail businesses – have bred collaboration out of their culture.

The other – not mutually exclusive – approach has been for many businesses to reject the ambition of share growth in exchange for profit growth revolving around a tighter focus on consumer relevance. This approach also requires collaboration to look at new ways to reinforce continual relevance to consumers.

The key fact is this. Overall growth will be steady not heady. Retail businesses need to be clear on what their objectives are and what it will really take to achieve them. And we need an about face on stakeholder relationships to engender an environment of productive collaboration.

The pleasure of growth after all is much more enjoyable than the pain of failure.