Retailers struggle to cope with an accelerating decline in consumer spending. Major retailers, across all spectrums, are experiencing dramatic declines in same store sales:

Williams Sonoma - 38% (forecast)
Gap - 14%
Target - 6%
Macy’s - 7%
Home Depot -9%

Some of the strategies being seen in the marketplace include:

Cut costs - not prices.
Home Depot is resisting the market’s move to deep discounts. Their belief is that in today’s economy, these promotions generate little incremental traffic. Companies would rather maintain margins and move aggressively to cut costs. This includes closing stores, layoffs, slowing the opening of new stores, reducing inventory, etc. For example, Macy’s has consolidated its divisions, closed 11 stores and reduced its workforce by 7,000.

Localization
Macy’s is rolling out a My Macy’s strategy. Individual stores will have more freedom to select merchandise that better reflects the needs and tastes of their local market. Home Depot has similarly added a new emphasis on localization to take advantage of local tastes to wring every possible sale out of the market.

Focus on staples
Discount stores like Costco and Target are beefing up on heavily discounted staples like milk, eggs, baby products and bread. Hoping that these discounted necessities will draw more shoppers into the store.

Private labels
From Wal-Mart to Nordstroms, sales of private labels are growing and the share is coming out of the name brand companies. Retailers are pushing manufacturers to come through with substantial price deductions. And, if they don’t get the price cuts, the stores make room for more private label products on their shelves.

Is there a solution?
It’s clear that there is no single strategy that will save a retailer in these very difficult times. Instead, companies are forced to completely re-evaluate their business processes as well as their structural approach to the marketplace.

The most important goal is to survive the downturn in a way that does not damage the company once consumer spending returns. But, it’s a razor’s edge. How can you be the right retailer for a recession and a destination store when shoppers return?

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Martin Hoffmitz
VP, Client Partnering
BehaviorWorx Inc.
#202 - 222 Islington Avenue
Toronto, ON M8V 3W7

Email: martin.hoffmitz@bwxi.com

Office: 416.251.0111 x250

Cell: 647.287.4491
Fax: 416.251.9489
Web: www.bwxi.com
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