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Retail Trends

Getting Back to Business
Projections look promising for retailers willing to tough it out before the imminent economic boom.

by Robert Nieminen

For retailers in just about every segment of the U.S. economy, the year 2001 went down as the worst for business since 1990, with the impact of the September 11 attacks taking a heavy toll on an already struggling economy. As 2002 continues to unfold, however, the economy is in a much more favorable position for the second half of this year, according to projections from G.A. Wright Marketing Inc.

In his report, Retail Trends 2002, Gary Wright predicts that a turnaround in the economy is coming, and when it does, we will find ourselves in the midst of “a very strong growing economy with some great opportunities for retailers of all sizes but especially for small retailers.” In fact, Wright says retailers should start seeing positive gains by this month followed by a very strong holiday selling season.

That’s promising news for the window coverings industry, but in the meantime (and in the months and years ahead), retailers need to take several factors into consideration in order to ride the coming economic boom.

COMPETITION

The result of the intense competitiveness of the retail industry in this economy has resulted in consolidation, where marginally successful companies are failing while successful companies continue to grow, according to Wright. “In some cases the dominant competitor in a market is growing through acquisition while in other cases the dominant competitor is gaining market share by forcing weaker stores out of business,” he says.

However, he points out that consolidation is not happening rapidly in the furniture and home furnishings stores. This presents an opportunity for retail growth over the next two decades in luxury items that are sold with a high level of service—goods that depend on a lifestyle niche. “This is important for smaller retailers that want to escape the dominance of discounters and category killers,” Wright explains.

PRODUCT CYCLES, TRENDS

As new products enter the market, it is important to understand the product life cycle and how it applies to the products that retailers carry. Wright explains that when a product is first introduced, mass-market retailers don’t typically have the sales staff to sell new and innovative products that may have features and benefits customers don’t know about or may not understand. Because manufacturers of these products aren’t always able to supply chain retailers, they are often best sold by independent, specialty retailers who can take the time and effort to sell the product and are protected by the fact that these products are not on the shelf at their large competitors, allowing them to charge a price that will turn a profit.

However, once the product gains popularity and continues in its life cycle, it most likely will become mass produced by the manufacturer and sold at a lower cost by chains at a mass-market level, making it a product that specialty retailers may want to discontinue selling. Therefore, product cycle alone is not sufficient to compete; retailers must also stay on top of trends, particularly fashion, Wright says.

More than just apparel, fashion obviously dictates trends in home furnishings as well and is an important consideration that retailers must pay attention to in order to remain competitive. However, Wright points out that knowing what will happen in the fashion world is much less important than knowing what is happening today. “The cutting edge of fashion is not a place most consumers want to be and is certainly not where most sales are made,” he points out.

TECHNOLOGY

The first retail companies to embrace technology early on were able to use information systems to control inventories and improve efficiency, giving them a huge advantage over their competitors. While some smaller retailers may be reluctant to invest in new technologies, Wright suggests that “it doesn’t take a huge advantage to be very successful. Just being able to turn inventory marginally faster and, therefore, sell it for slightly less, or being able to react to fashion trends faster, or know which customers are most likely to respond to specific advertising appeal, often is enough.”

In order to survive as a retailer, Wright adds, it is essential to develop a strategy that focuses on price, merchandise or superior service—all of which require technology. That means developing a Web presence, which will become as important to retailers as a listing in the yellow pages (if not more important). Even if retailers don’t sell merchandise online, their Web sites should provide customers with information, advertise specials and drive traffic to the store. Remember, the retail store is the only place a shopper can touch, taste, smell and try the product before buying, but the benefits of using technology to bring customers in should not be ignored.

Wright concludes his report by pointing out that great successes are to be had in the very early stages of an economic expansion, so preparedness is key. He warns, however, that the risk most retailers will face going into the latter part of this year will be “an overly cautious attitude, under-buying, and consumer demand for products that cannot be satisfied because of overly cautious buying.”

According to G.A. Wright, the boom is coming. Are you ready?