Any retailers hoping once we’ve got this nasty economic downturn business out of the way, things will get back to the way they were may be in for a surprise.
Retail industry analyst Verdict Research has predicted growth of eight per cent over the next five years, compared with 14 per cent in the same period up to 2008.
It said consumer confidence has been damaged in the long term and shoppers will not return to their high-spending, high-debt habits of the past decade.
Bleak words, considering economists don’t believe an upturn of any kind will kick in for another 12 months.
However, according to Verdict, the retail market emerging from the ashes of this economy will be less competitive and retail companies that have managed to keep their heads above water will find more opportunities for growth by taking up the space left by less resilient competitors.
Even so, Verdict paints a picture of pickings being slim, with non-food growth down to 2.1 per cent in 2012 – a third of the average growth in the 1990s.
Low-income shoppers will be much more price conscious and across the board, more disposable income will be devoted to savings and managing debt.
Clearly, if retailers want to keep increasing profits, they are going to have to find ways other than accruing more of the money in the shoppers’ purse. Cutting operational cost is the other alternative. Being a physically distributed, workforce-heavy business is very expensive and there are undoubtedly many ways retailers can trim some of that fat.
Another way to squeeze profits out of the business is to improve operational efficiencies, by reducing wastage and by aligning the product offering more closely with customer demand (which in turn cuts down on unsold goods that have to be marked down to clear). This requires incisive business intelligence gathering of the sort provided by - you’ve guessed it, Verdict Research.
None of these options is nearly as exciting as opening up 100 new stores or buying out your nearest rival, but the option of spending to generate sales growth has reached its limit and retailers can’t afford to keep chanting to themselves “if we open a new store, customers will come.”
