October 6, 2009
Whether they sell high-end designer clothing or tractors and pet food, retailers across the country are girding for leaner times. Consumer spending has dropped to 10% below its historical trend line, creating a landscape with far too many stores and far too much merchandise for consumers’ thinning wallets to support.
This is the new frugality, and it is forcing many retailers into a struggle for survival.
“Consumers coming into this recession were overwhelmed,” Mindy Grossman, CEO of the $2.8 billion shopping network HSNi, told fellow retail executives last week. She was among a group of CEOs from Fortune 500 retailers who spoke to an audience of their peers at Argyle’s 2009 Leadership in Retail and Consumer Products Forum, which was held last week in New York.
Now, she says, consumers are demanding things on their own terms and their decisions are driven by value – and that is true from the low end to the high end of the retail chain.
“The attitude of consumers has changed immensely,” said Linda Heasley, President and CEO of The Limited. “More used to lead to more,” she said. “It’s not anymore. Now less is more.”
Heasley has been encouraging customers to “shop their closets” before they come into the store, which would have been heresy just a year or two ago.
Marcello Bottoli, a former CEO of Samsonite who now advises high-end retailers, said this environment is “totally different than anything we have seen in the past.” The focus of retailers, he said, has changed from growth to cash conservation and efficiency improvements in stores.
James Wright, Chairman and CEO of the $3-billion Tractor Supply Company, said that he initiated steps to deal with the recession at the beginning of 2008, and focused his strategy on “CUE” products – consumables, usables, and edibles. He has cut costs primarily in those areas furthest away from the customer – in administration and distribution – and has also reduced inventory.Wright cancelled all television advertising, although he said that was more a reflection of TV’s inability to perform relative to other media than a reaction to the depressed environment. “Until we see more clarity on the macro issues, we are taking it slower on growth,” he said.
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