Stores Magazine - December 2007 - (Page 31)

Bucking Recession re you afraid to say the “R” word? Plenty of economists are hesitating, too, and with good reason. While it’s difficult to squelch the sentiment that the economy is on shaky ground, financial indicators are volatile — thus making predictions tricky business. Consumer spending has proven resilient enough to pull the nation through some rough patches in the past, and will sustain the economy in the coming year. A healthy dose of tentative optimism will be prudent for retailers during the first half of the year; as the nation gets closer to the 2008 election, a rebound may be in the offing. Sanguine soothsayers claim that the Federal Reserve’s interest-rate reductions over the past two months are enough to stave off recession and spark a return to a brisker business pace. They point out that the U.S. economy grew 3.9 percent in the third quarter and added 166,000 jobs in October, and reiterate Alan Greenspan’s remarks that he sees “less than 5050” odds of a U.S. recession. Still, optimists don’t make good press and bad news is having a bull run. Dispirited consumers, falling home values, and the sub-prime mortgage crisis are catalysts. And a slowdown in consumer spending, rising oil and gasoline prices and a slip in manufacturing activity are also shaking convictions. For the retail industry, it all comes down to consumer confidence and how those feelings influence spending. Will shoppers continue to spend far more than they save? Will they shift their store preferences to align with a truncated budget? The answer is probably “both.” If anxious Americans decide to save or pay down debt rather than spend, retailers will take it on the chin. And, shoppers worried about the deepening housing downturn may feel that pulling equity out of their homes is no longer an option. Still, business at high-end and luxury retail stores has proven to be remarkably resilient. Indeed, shoppers behave differently today than they did in the past – making consumer behavior one of the most volatile factors in the economic equation. There’s truth to the argument that consumers keep on spending no matter what, and retailers can find solace there. The Neiman’s shopper may trade down to a department store, and Kohl’s shoppers may head for Target, but they’ll keep spending. Quick-serve restaurants could be in for a lift; and fast feeders, like the comeback kid McDonald’s, may see a revenue boost, too. A be passionate about the planet? Despite the best of intentions, most will find themselves in agreement with Kermit the Frog: It’s not easy being green. Converting lighting, providing reusable bags and establishing a recycling program are first steps on the road to becoming an eco-warrior. But building green stores, overhauling sourcing and manufacturing to be more in sync with green objectives and determining the right mix of green products on the shelf are a whole lot harder to do. Wall Street says it stands ready to reward companies that back the environmental trend, but make no mistake — it’s keeping a wary eye on the cost/benefit equation. And shoppers may say they’re all for eco-friendly wares, but studies have shown that acceptance seems contingent on price. If 2008 brings about corporate and consumer belttightening, “green” could get squeezed. That said, retailers have made impressive strides. Wal-Mart, JCPenney, Staples, Gap, Macy’s, Office Depot, Whole Foods, Home Depot, REI: all have won kudos for their commitment to sustainability. Look for those efforts to continue in ’08 — provided these companies continue to see ROI. The next big efforts will be a push to achieve greater social responsibility in sourcing and to install more environmentally friendly networking and storage equipment on the IT side. Attention Small Mart Shoppers or a long time it was all about “big” – big stores, deep product offerings, expansive thinking. Now the tide has turned: Retail executives are not only thinking small, they’re building smaller stores, delivering edited product assortments and betting that this approach will deliver a big return on investment. Nowhere is that more apparent than in the supermarket channel. Since Tesco announced its British invasion last year, the spotlight has been on stores of the 10,000-sq.-ft. variety. Safeway’s chairman is prepared to open smaller stores if Tesco’s Fresh & Easy Neighborhood Market clicks. Wal-Mart has registered two new trademarks and is expected to test a convenience store format in Southern California, where they’ve struggled to overcome big-box opposition. Whole Foods announced intentions to convert a former Wild Oats F Green v. Green etail CEOs will find themselves faced with some hard questions about the green movement sweeping through corporate America. The biggest one: Can they be profit-driven and still R WWW.STORES.ORG STORES / DECEMBER 2007 31 http://WWW.STORES.ORG

Table of Contents Feed for the Digital Edition of Stores Magazine - December 2007

STORES - December 2007 Contents Executive Editor's Page President's Page Holiday Shopping Extravagance What Shoppers Think 10 Things You May Have Missed Numbers Worth Counting Full Price/Markdown Retail People Niche Marketing Eight Predictions for 2008 Concept2Watch Merchandising Strategy Sourcing E-Commerce Supply Chain Warehouse Management Software Contactless Payments Marketing Marketing Online Loeb Retail Letter ARTS Update Point of View NRF News Retail Industry Calendar Last Laugh

Stores Magazine - December 2007

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.