2009 turned out to be a tough year for industries across the board but for the retail industry in particular. As the credit crunch led global economies deeper into the recession, consumer sentiment was eroded as a result of layoffs, bankruptcies and a downturn in a host of markets (not the least of which was property in the US). Lower disposable incomes, amidst this tight credit and uncertain employment scenario, had, unsurprisingly, a severe impact on the retail sector. Discretionary spend in many areas, including clothing, durables and automobiles, were the first to be pared down, and at the same time, consumers began demanding greater value in terms of affordable yet high-quality products. These effects were more pronounced in developed regions – in North America and Europe, department stores lost share to discount retailers as consumers chose cheaper product alternatives (store branded/private label products).

Faced with these changes, retailers responded with store closings, reduced inventories and a revision of their product strategies. Growing online sales in key retail segments such as electronics, apparel and music/entertainment spurred multi-channel retailing (online, in-store, kiosks). Many leading retailers consolidated their supplier base and re-evaluated sourcing strategies to maintain a lid on costs.

The market has been sustained by key sectors, including grocery retail and mass merchant segments. Emerging markets such as China, India, Brazil and Russia have also been leading a resurgence in demand. Looking forward, in light of slowing job losses, an easing credit situation and signs of stabilizing property markets, developed economies, such as the United States and the UK, are expected to see retail growth between 3-5% in 2010. In contrast, BRIC countries are expected to grow by 9-12% over the same period. Thus, global retailers are expected to increase their focus on newer markets in Asia and Latin America. Additionally, cost savings through low cost sourcing are expected to continue to remain important as retailers carefully watch their bottom line.

At The Smart Cube, we apply our deep sector knowledge to help clients with the myriad of challenges faced by the retail sector. From identifying attractive market opportunities to providing advice on sourcing strategies designed to tap into both outsourcing and LCCs; from evaluating the disorganized nature of most developing country retail markets to assessing changing business models, driven by the growth in online retailing and its ability to integrate with the traditional physical retail model; from identifying and profiling core high value customer segments to mining masses of store/distribution/complaint/returns data to identify key patterns, themes and their resultant implications on operational strategies. We offer our clients a host of insight driven solutions to help them address their most critical business issues. To learn more about our offerings in Retail space, please contact us.