Retail Dude

As all of us know that entire world’s economy is ailing because of recession. Companies are not able to beat the slowdown and are registering negative growth consistently. Though there is a glimpse of recovery but same is being look on as a temporary phenomenon as everyone is having pessimistic notion of the future.

To sustain in consistent slowdown, most of the retailers are trying to consolidate their business to cut down cost and register more profits. They are afraid of red figures in their books and are doing so to maintain there stock prices and shareholders. Many feel that this is rationalizing there business and will help them to have a long term sustainability.

But if we analyze, there has been a common trend among all companies who have gone out of business during Recession – “All of them went into Cost Cutting before dissolving”. It doesn’t mean that companies who are involved in cost cutting will go out of business. But then this process needs to be a rational one.

For instance, if a retailer decreased the number of store staff from 10 to 7 to cut down store cost, and as a result of this few customers are unattended during peak hours, then cost of lost sales should not be more than the cost saving from layoff. And this need to check by aggregating the result for a period having all kind of trends like peak and dip. As result may be favorable in dip and unfavorable in peak. Similarly many other factors need to be considered before taking a small decision otherwise the effect can be awful.

But there are some brands that are very much optimistic about recession and are considering it as an opportunity to expand optimally. Levi Strauss & Co. is one of such brands. Even after reporting losses, they are expanding there presence and opening as well as acquiring new stores. And I think that this approach is very wise as all resources are cheap during recession. Retailer can get cheaper real estate, merchandise, labor etc. Moreover, this will generate a sense of job security among employees which will in effect increase their loyalty and reduce the attrition rate during boom. Retailer will be able to have more market presence and visibility. And this will strengthen the market share during boom.

As per a study, 30% of the retailer will lose their business by the time recession ends and the remaining 70% will be stronger than ever. And only the retailer who will be doing things differently will be able to include their name in these 70% retailers.

- Rajeev Damani

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