Retailing in a Down Economy, any different from a Boom?
An economic downturn affects everyone, some more than others. The overall effect tends to lower consumer confidence and this has a direct impact on consumer spending. Or does it?
Does it merely take the spending form one segment to another segment, for example instead of shopping at a upscale apparel retailer, do people shop at a discounted retailer? Take the worlds top retailers, how are they coping up with these challenging times, here are my thoughts on some of the key operational aspects of selling in a down economy
1. Product Mix - Higher stress on product line/item level profitability analysis
This leads retailers in identifying the right mix of stock to carry in their stores. In a tougher economony, this analysis is key to offering better discounts, carrying a better product mix resulting in a stronger financial health.
The key in this parameter is to shift the spending towards those items which give a better overall profitability for the retailer.
2. Store Opening/Closing
Most retailers would take a good look at the profitability of the individual stores and cut down on opening of new stores and in fact close down some existing laggards as well. This is a common mechanism of cutting spending drastically and boosting the bottomline
3. Open Alternate Sales Channels
Buying online is a hot concept in retailing today, and buy online and pick up at the store goes beyond the online world to combine the best of both the online and brick and mortar store. For example you could buy fast selling items online without standing in a line outside the physical store. And yet pick up the actual merchandise in a store nearby. This cuts eliminates the shipping charges and offers a tremendous opportunity of reducing stock out situations.
I am sure the list is a long one, what do you think are some of the key themes that retailers are employing in this tough economy? Do post your comments below!
Comments
One classic strategy which I have seen is cross-selling where we get another item at a discounted price.
Posted by: Sandeep Chatterjee | July 20, 2008 05:02 PM
Cross Selling is indeed a good option, Oracle Telesales has some good options for upselling and crossselling.
Posted by: Venu | July 23, 2008 02:24 AM
Recent trends have shown that people do shift their shopping to Discounted Retailers. Increase in Sales numbers for Walmart is a testimony to that. In fact in developing economies like India, sales at Big Bazar is better than other stores in same segment.
In addition to above strategies suggested by you, retailers are focusing on reducing Supply Chain costs to a great extent. This includes their procurement costs, transportation & logistics costs etc.
Other impact of economy which I can think of is bit of consolidation in Retail industry. Retailers are eyeing companies to enter into new markets/segments.
Posted by: Manish Agarwal | September 8, 2008 09:43 AM