Recession and Retail Industry

News headlines are highly depressing as the economic meltdown is adversely affecting the entire world. But still I read them, especially the news related to money market, retail industry, consumer behavior and various other related articles. It is a rough ride out there and a significant effect is on the retail industry.

There are lots of factors that affect, like consumers’ discretionary spending power is being sapped by higher energy & higher food costs and to beat it all there is job loss. It’s a trickle down effect impacting the retailers negatively. With the goal of maintaining their gross margins as it is critical to be in business, Retailers are cutting prices and limiting inventories. During the past when there was recession and when people cutback on spending, many companies came up with innovative ideas to remain in business and maintain gross margins. To name a few ideas -retailers introduced rebates and discount commissions, banks introduced interests on checking or current accounts, supermarkets & departments began accepting credit cards to encourage people buy and spend money. All were appropriate offers for the times. These offers are still good and have survived beyond the recession times. The companies that invented and employed these recessionary response strategies fared well.

Today, the government’s stimulus funds may help the industry but the retailers should do well to acknowledge the recessionary state of mind, and figure out the best way to respond to it. When money is moving freely, retailers don't have to be all that creative to get their share of it. But when money is slow flowing, it's not enough to just show up. History shows that the retailers who survive economic setbacks are the ones who get inventive, get resourceful, and get noticed. In one of the news paper articles it stated that car sales will slow down. but it’s true that car sales aren't going to stop altogether in tough economic times. Toyota understands that, and is positioning itself not only to be the "official car of the 2009 recession," but also on maintaining its global domination afterwards. First, it is focusing on being accessible with hybrid and ultra-compact vehicles that people will want to buy now, and keep in the future. Second, it is focusing on being affordable by involving suppliers in the design process to save an estimated $10 billion. Third, it is focusing on being cooperative by giving free efficiency consulting to its own suppliers. The suppliers cut costs, pass the savings onto Toyota, who can, in turn, give its customers a break. This is one of the best examples to get creative and innovative to remain in business. I believe that the best place for everyone to focus is on supply chain strategies, for the right retailers; today is a time of great opportunity to eliminate redundancy and increase efficiencies in operations to make profit. Make your supply chain more “Collaborative” “Responsive” & “Agile”

More to come on supply chain strategies,…….