2008 Retail Recap, Predictions for 2009

Retail at all levels is suffering as consumer confidence crumbles. Projections for 2009 are grim and retalers are scaling back inventory and staff, but there are other measures …

Retail at all levels is suffering as consumer confidence crumbles. Projections for 2009 are grim and retalers are scaling back inventory and staff, but there are other measures for weathering the downturn that are worth consideration. Read more on this topic in this article from Blue Maumau.

Here we are, another voice in the Greek chorus chanting the story of retail holiday sales. The overarching theme: oddly mixed and badly down. The luxury market suffered, but discounters like TJX didn’t make a lot of hay either. Sears rejoiced with comps down 12.8 percent. Go figure. In short, it was a strange, unpredictable season.

Combining sales and EPS estimates with the announcement from the NRF that 2008 Retail Container traffic was the lowest it has been in four years, a picture starts to emerge. Retailers reduced inventory plans early, way back when gas prices were up over $4.00 a gallon and consumer confidence was crumbling. The economic meltdown of September/October was the icing on the sour cake, but plans were already set. Expectations were low and when January rolled around retailers quickly closed the door on Christmas and began setting product for spring.

Putting on our "Karnak the Magnificent" hats, we’re making some predictions for 2009—how we expect retailers to respond and the technologies they’ll use to support new initiatives.

Merchandise Sourcing: Diversifying the Portfolio

Even as retailers continue to scale back inventory plans, they recognize the consequences of persistent out-of-stocks. Last week we pointed out the difficulty in predicting short lifecycle product demand and reacting when you’re buying six months and thousands of miles away from that point of demand. The solution? Go small on initial buys and source replenishment product closer to the point of sale. But product quality remains a concern of manufacturers, retailers and consumers alike, thus the need for clear and specific product specifications, communication on the status of components and raw materials, and the need for factory audits.

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This brings forth the need yet again, for technology to support the entire product lifecycle—from sheep to shelf, or farm to fork (pick your metaphor). Retailers MUST get faster. This cannot be done without enabling technologies. We love our spreadsheets just like everyone else, but sometimes they’re just not adequate for the task at hand.

Workforce Management: Give People a Reason to Shop at Your Store

We try not to name names when we have awful retail experiences and will continue that trend. Over the holidays, one retailer lost a $500+ sale when I could find no one to wait on me. I got so frustrated with the lack of help on the floor, or even anyone who might care that I finally said to a manager-type, "If you’re not going to help me, I’m going to your competitor" (and I did name names). He looked away, and I walked out. In the end, I bought the product from Amazon.com—who claims to have had its best holiday season ever. Why bother shopping in a store when the prices are confusing (on chicken scratched hand-written signs), the people don’t care, and/or the main product’s been marked down in favor of grossly overpriced accessories? Retailer number 1 reported comps down 7 percent. I wonder if management realizes why sales were lost and opportunities missed.

The same theme remains. Retailers have to react more quickly. If traffic is up, you must get workers into the store. Workforce management systems can help, and just using them to set the plan is inadequate. You need to react.

The Price is Right: Your Customers Know What Items SHOULD Cost

Retailers tell RSR they know it’s critical to be price competitive on highly recognizable items. But they’re torn by the temptation to run big promotions on large items, and make up the margin on accessories. The trouble is, consumers do a lot of due diligence. They know what an item should cost. Returning to the $500 sale previously mentioned, I fully planned to buy the product at retailer #2 (not Amazon, an actual store). But a necessary accessory was $40, when I knew full-well it was available on the web for $9.99.

The lesson? The definition of "highly recognizable items" has changed. Consumers do a lot of research and you can lose the whole sale if you make them feel like they’re being duped. Oddly, I would have gritted my teeth and said "okay" if the accessory was $15 or even $20 in the store. But $40? It rankled me. RSR is about to release its 2009 Pricing report. We know retailers are getting ever more promotional, even as they also focus on key item pricing. As they say on TV, "Kids, don’t try this at home." Pricing technologies are more important than ever to determine elasticity and find the optimal mix of promotional and regular prices.

In Summary: Key Technologies Needed to Navigate Infested Waters

By all accounts, the economy is not getting better any time soon. Wise retailers will find the means and methods to implement and regularly utilize three key technologies over the coming year:

  • Sourcing and Product Lifecycle Management—to support diversifying countries of origin for more responsive replenishment
  • Workforce Management—to give customers a reason to shop in your store, rather than buying anonymously across the internet
  • Price Optimization—more than ever, the customer is sensitive to over-priced or wrongly priced merchandise. Price optimization, which includes regular, promotion, and end-of-life pricing is a critical tool to insure a good mix of margin, sell-through and customer satisfaction.

In fact, implicit in these three technologies is the fourth overarching and probably MOST important technology—near-real-time business intelligence that helps retailers react more quickly to changes in the environment. More than ever, in 2009, retailers will need rapid responsiveness to acquire and keep valued customers.

This article has been reposted from Blue Maumau. View the article on Blue Maumau’s small business and franchise news website here.


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