Buyers are not buying like they once did and retailers can no longer run their business the same way they did as recently as several months ago.
Retailers are making drastic changes. They are cutting out marginal suppliers, hiring outside experts to keep inventory lean, and making efforts to satisfy the customers they do have.
They are worried that shoppers may not start spending much again for a while. The upside is that retailers’ problems may be mostly good news for buyers. The downside is that buyers who want something unique may have to look harder. Retailers are getting rid of offbeat, unpopular colors and styles, which will mean fewer choices for buyers.
As nervous consumers have stopped shopping, pricing goods within their financial reach has become a big focus for retailers. According to the International Council of Shopping Centers, November and December same-store sales fell 2.3% year-on-year. The worsening retail sales slump in January has the industry worried about the next few months.
Many retailers are cutting inventories and slashing their expenses. They are navigating new territory, predicting that the fundamental shift by consumers to spend less and save more will linger. The biggest unknown is when or if buyers will ever resume spending the way they did when the housing market was booming, credit was easy, and jobs were more plentiful. Now, buyer frugality seems to be more important.
Many brand owners and retailers are consolidating or eliminating some of their suppliers and are focusing on serving their best customers. However, weaning their customers off of discounts is a big challenge for the retail industry, as buyers have gotten used to them.
For the last couple of years, many of the nation’s best-run retailers have been reducing inventories in response to the consumer spending slowdown. But no one anticipated the severe retrenchment that hit in September as the financial meltdown ravaged shoppers’ retirement accounts, reduced credit availability, and resulted in massive job losses.
As shoppers simply stopped shopping, stores were forced to discount as much as 75% off in some cases even before the official start of the year-end holidays – resulting in the weakest season since at least 1969.
With no sign of the economy improving during the 1st half of 2009, retailers are preparing for times to get worse. Those who have survived are facing battered fourth-quarter profits and are slashing expenses and hoarding cash. Apparel retailers are cutting inventory by 20-30% for the summer and fall seasons.
But it’s just not about slashing the merchandise inventories they carry. Some retailers are turning to outside specialists in areas like sourcing and currency hedging to reduce the impact of volatile foreign exchange rates. They’re working with suppliers to reduce the time it takes to produce an item. And they’re trying to understand the new mindset of shoppers, scrutinizing the products they offer to see whether the prices and quality meet the new standards from consumers who are questioning the real value of things.
Apparel suppliers say they have noticed the difference in recent weeks as the buyers for big chains visit their showrooms to order for fall. The big chain buyers want eye-catching pieces that have longevity – and nothing too radical. They are buying styles with staying power. Previously, they have been buying one color in multiple styles, now they will be buying multiple colors in one style.
For now, retailers need to help shoppers “open their pocketbooks” and keep the economy rolling.
Posted by Dave Gardner 
