Retailers having to adopt survival strategies to stay in business

RETAILERS in the West Midlands will have to implement practical survival strategies to get through 2012, sector advisers have said.

The strategies are expected to cover a refresher course in basic retailing and the use of turnaround management techniques.

Simon Purkess, Midlands head of retail at KPMG said: “Retailers are currently in the centre of an economic storm.  The pressures on consumers have been building for some time with many having significantly less money in their pockets than just six months ago.  

“When you add this to the ongoing uncertainty surrounding the economy and the increasing level of unemployment, retailers are having to fight every inch for a share of their customer’s wallet.”

According to the professional services firm, retailers are becoming increasingly engaged with turnaround specialists to help them manage the pressures and maintain stability while they focus on delivering the retail experience demanded by customers.

Ben Collett, a turnaround specialist within KPMG’s restructuring team who advises retail businesses, said: “The encouraging message from the retail sector is how well most retailers have managed through the downturn to date.

“Yes, there have been failures but there has not been the fallout predicted by many pundits. We do not expect any easing of the pressures for at least the next twelve months and hence many retailers will need to continue pursuing survival strategies through 2012.”

He said getting the retail basics right would remain as relevant as ever. However, improving areas such as brand, store format and cost efficiencies are likely to take some time to show financial benefit.

The critical survival factor is expected to be maximising the time available for such strategies to take effect through aspects such as micro cash management processes, which will provide greater control over working capital, reducing peak cashflow pressures and risk of covenant breach.  

Visibility over product line and store performance will lead to a more proactive approach to procurement and discounting allowing cashflow to be maximised while minimising the impact on profit.

“Over the past 12 months there has been a noticeable switch in consumer behaviour with increasing demands and expectations for value and discount from customers,” added Mr Purkess.

“The way in which they enact their purchase too is changing, with many experiencing the product in a store and then looking for the best deal online, leading to many traditional retailers having to make discounts and reduce their margins.”

Factors such as these will have to be dealt with alongside growing investment requirements for larger stores, new technology, improved internet and mobile shopping applications, he added.

“The High Street we are seeing in 2012 is going to look very different in 2013 and beyond.   Focussing on both the retail basics and turnaround management techniques will give retailers the best chance of remaining relevant to consumers and surviving the current pressures,” said Mr Purkess.