Evolving Retail
As retail sales growth slows this year to about a 3% pace after a 5% gain
in 2004 ...
A dramatic shakeout is getting started. It will significantly thin the
ranks of store chains over the next five years or so.
Change will rumble through the economy, forcing thousands of retail suppliers
to adapt and pushing consumer products makers to merge. Landowners will
redevelop malls for new uses, and good space for small merchants will vanish.
Hardest hit: Mid-tier department stores squeezed out by discounters
and luxury chains. The Sears-Kmart merger and a probable marriage of
May and Federated are two recent examples.
Supermarket chains are getting pounded by discount food sellers such
as Wal-Mart and Costco. Wal-Mart food sales are some 10 times higher
than those of many food chains, including A&P, Pathmark, and Winn-Dixie.
Also on the endangered list: All types
of specialty outlets ... consumer
electronics, linens, cosmetics, toys, auto parts, furniture. Discounters
are extending their reach in these areas at a fast clip.
The number of shopping centers faces
a thorough winnowing. Up to a quarter
of the current 47,000 centers may fall by the wayside. And every time
a Lord & Taylor, Sears, or specialty store disappears, its host mall
loses a magnet that generates vital customer traffic.
But total retail space will hold steady. Discounters will plan to open
more megastores and small urban outlets to lure city dwellers.
Defunct malls will become residential
projects or office complexes with
limited retail space.
Suppliers will feel more pressure
to cut prices and endure less secure
buying relationships. Far fewer retailers will guarantee shelf space
in exchange for slotting fees. That’ll cut costs for suppliers
but also increase uncertainty. Suppliers of consumer products have to
bulk up to gain clout in negotiating with big chains. The merger of Procter & Gamble
and Gillette is just the beginning. Johnson & Johnson, Nestlé,
GE, and other big players may go shopping, too.
Strong Internet sales growth is reinforcing
retail consolidation as
increasingly demanding consumers find it easier to comparison shop.
Cybersales will increase about 20% annually through decade’s end
and account for at least 10% of total retail sales, up from 5% last year.
Lending
Banks are rolling out new loyalty rewards for business customers:
Credits for stuff they’d otherwise buy ... office equipment, telephone
systems, and the like ... redeemable with participating vendors. In return
for credits, customers give the bank all of their business.
Consumers will get more goodies, too ... airline mileage points, gift
cards, and more. Free toasters aren’t going to draw business anymore.
Banks are integrating their records to keep track of services provided
to customers by different departments. Without the full picture, lenders
don’t know how many credits their best customers are entitled to.
Free credit reports will be available
nationwide by September 1. Federal
law requires that the three major credit-reporting bureaus allow you
to get a free annual copy of your credit report by then. Residents of
some states are already eligible. More will be in March and June, and
all by Sept. File requests at www.annualcredit-report.com.
Don’t
be duped by any pop-up ads that could lure you to a bogus Web site.
Shipping
U.S. companies are becoming vulnerable to supply disruptions.
Manufacturers and retailers run a major risk if they rely heavily on
one or two suppliers of critical parts or services. Delivery delays due
to an airline collapse, port security problem or unexpected snafu involving
an overseas supplier are just some of the growing concerns.
There are several steps you can take to reduce the threat:
Line up additional suppliers of critical materials and services. Having
a second or third vendor may cost a bit more in the short term but
will save far more if there is a breakdown in just-in-time delivery.
Know your supplier, an assignment that requires an extra effort if it’s
an overseas firm. Check their books, references, and facilities.
Consult a specialist who can point out potential weak spots in sourcing,
production, and distribution. Odds are good that your costs will be recouped
and then some by identifying waste and inefficiency.
© 2005 The Kiplinger Washington Editors, Inc.
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