As economy nosedives, retailers take huge hit
Economic conditions caused retailers to take a hit during the normally busy fourth quarter of 2008. Some see the glass as half full, but many are anticipating a dour outlook for the year ahead.
Even the top executive of Wal-Mart is sour on the economic outlook for 2009, and the retail giant actually gained market share in the last year.
"I don't see anything that tells me it's going to turn around quickly," Lee Scott said Monday at the National Retail Federation's annual conference in New York, Reuters reported. As consumers became extremely cautious about spending, they turned to the discount retailer last year.
But overall, retailers weathered the worst holiday sales season in nearly four decades, according to the International Council of Shopping Centers. And even Wal-Mart did more poorly than expected in December and had to cuts its fourth-quarter profit predictions.
Scott, who retires February 1, warned retailers that consumers may not go back to their free-spending ways. "There are a lot of young people who have learned what it's like when you are living on the edge and the bad times come."
However, just because retailers are facing bad times is no excuse not to make investments. To survive the recession and perhaps even gain ground when the economy improves, retailers will need to invest in new tools for customer service and strategic IT programs, according to Stacy Janiak, U.S. retail leader for Deloitte LLP. For example, retailers can train their workers to improve the shopping experience for their customers, Reuters reported.
The combination of job losses, tight consumer credit, and restrictions on lending has led to bankruptcies and consolidation among retailers. More than a dozen retailers filed for Chapter 11 bankruptcy protection in 2008, National Retail Federation President and CEO Tracy Mullin said.
Take Utah as just one example. Even though it is considered to have a healthier economy than other states, it is losing Office Depot stores in Salt Lake City and Murray, Starbucks cafes in Ogden, Syracuse, and Riverton, a Sears Grand store in American Fork, and a Steve & Barry's clothing store in Murray, the Salt Lake Tribune reported. Retailers that are closing all locations everywhere include Mervyns, Harold's apparel chain, and Linens n' Things.
One industry associated with retail is experiencing growth: security.
A survey last month of 52 of the largest and fastest-growing retail companies in the nation by the Retail Industry Leaders Association of Arlington, VA, found that 84 percent of respondents reported increased rates of theft and amateur shoplifting in 2008 compared with 2007.
Charles Wall, CEO of Creative Security Co. Inc. of San Jose, CA, plans to hire up to 150 additional people over the next six months to work in on-site security, alarm installation, and sales, reported the Silicon Valley/San Jose Business Journal.
"We saw a pretty substantial increase in shoplifting during October and November," Wall said. "In a lot of instances, you see people taking pharmaceutical items for themselves or their kids because they've lost jobs and just can't pay for the stuff anymore. It has been bad in recent months, but there's no question it's going to get a lot worse this year."