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Retailers will acquire weaker rivals, close stores and increase discount-product ranges to survive the global slowdown, an industry body said today.As the recession leads to “downward pressure” on shelf prices, retailers will have to “re-evaluate” their size and the strategic worth of the markets they operate in, according to an annual poll published today by CIES, a Paris-based trade association. Responding to economic challenges has replaced corporate responsibility as the most important concern facing chief executive officers, the survey of 596 company heads in 54 countries found.
In the wake of the credit crunch, leaders of food retailers and manufactures face challenges ranging from shifts in consumer behavior to fluctuations in currencies and share prices, according to the CIES Top of Mind survey. Where companies have failed, such as Circuit City Stores Inc in the US and Woolworths Plc in the UK, there is opportunity for stronger performers to grow through acquisitions and expansion, it said.
“Those retailers that still have a good war chest are in a really strong position this year. Smart companies are looking to greater collaboration and greater consolidation as a way of increasing efficiency and building market share,” said Alan McClay, chief executive of CIES.
Scope exists for mergers and acquisitions “of all sizes,” despite the lack of available credit from banks, said McClay. The UK and US, which have the largest share of distressed retailers compared to countries in Europe and Asia, are likely to feel the pain.
Retail chiefs are looking to cut prices to appeal to consumers looking to trim household spending, CIES said. Discount supermarket owners such as Aldi Group, Lidl U.K. GmbH and Wal-Mart Stores Inc’s Asda chain are particularly well placed to capture market share in a recessionary environment as they can attract “canny middle class shoppers” from more expensive rivals, McClay said.
“Consumers are trading down but they now expect the same quality to be delivered at that lower price. Those retailers who are nimble, who adapt quickly to this shift, will survive, while those that don’t risk going under,” McClay said.
Businesses said they will look to cut operating costs in any way possible to avoid margins suffering from aggressive pricing policies. Retailers and suppliers will share research and collaborate on developing products and promotions as one way of achieving greater efficiency, according to the findings of the survey, whose respondents included senior executives at Unilever, PepsiCo Inc. and Tesco Plc.
Far from looking to change their company strategies in the face of a global slowdown, boards and shareholders will look for “consistency” and “almost stubborn leadership” from those in the top job, McClay said.
“Strong leadership is the single most important factor in these times. You’re not going to see musical chairs in the top jobs of these companies,” McClay added.
CIES said the CEOs and senior executives involved in the survey replied anonymously online between December 2008 and January 2009. Of the total number of respondents, 247 were retailers and 132 were manufacturers; 173 were service providers and 16 fell into none of those categories.
Source| insidefranchising.net
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