Recession and the Retailer

So Mervyn King, The Governor of the Bank of England believes we are now in a recession. What a surprise! It’s something we’ve all believed for some time even if the official statistics don’t yet show it (technically 2 quarters of negative growth). He’s revised his forecast to show a contraction in the economy by about 2% sometime in March or April next year. This will cumulate in a fairly painful recession in 2009 with a decline of around 1.5%  for the year followed by the economy recovering in 2010 and strong growth in 2011! 

What does this mean for the retailer? As always in a declining market the weak will suffer and the strong will survive and prosper to take advantage of their weaker rivals. Even more so, having enticing products at the right price coupled with a strong balance sheet is the key to survival. There are signs that those retailers catering for the ‘value for money’ end of the market are gaining market share as consumers are trading down rather than stopping buying. The Business Advisory Group Delloite suggested that UK consumers plan to spend 7% less this Christmas than they did last year. The immediate thought is that there will be 7% less items sold but it could just as easily equate to the same items for 7% less than last years price (assuming a current inflation of 5% – that’s a whopping 12%!) As many of the retailers costs have increased this year (rent, business rates, electricity, minimum wages) the outlook for Christmas and next year is very depressing.

Action needs to be taken now!!! 

  • Keep stock levels tight – can any orders be cancelled – can stock be returned if late or poor quality for example.

  • Reduce selling prices – some discounting now can avoid deep cuts later.

  • Will your suppliers contribute to marketing costs – to fund your promotions? Can they supply stock on Sale of Return?

  • Take a look at the overheads (again!) do you need all those employees? Would part timers covering the busy periods be more cost effective than full time staff? Do you need the expensive Xmas party – taking them down the local pub/bar could help team building without breaking the bank.

  • Contact the Landlord now to see if monthly payment is acceptable BEFORE the December rent demand arrives.

Don’t procrastinate – survival is the key  

Next, I’ll tell you how to take advantage of the recession! 

Tony Heywood
Retail Troubleshooter
Rescue and Recovery Consultant
Gilcrest Services Ltd

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