Looking Ahead

In the eight years since it made its first appearance, the annual Retail Horizons study has come to be recognized as the definitive “state of the industry” report. Released at the NRF’s Convention & Expo in New York City and sponsored by KPMG and the NRF Foundation, the study offers benchmarks for the year just past and forecasts for the one just begun.

This year’s report doesn’t mince words: Retailers endured one of the “harshest operating environments on record” in 2009, as recessionary pressures crippled consumer spending, constricted credit and challenged margins for retailers in nearly every segment. Average gross margins declined by 3%, falling from 39% to 36%. With cash constraints putting cost reduction on the front burner, initiatives that required significant investment—including expansion, systems upgrades and even employee reduction—were deemed less important in 2009.

Many retailers reduced their store count during the first part of 2009, the report noted. The good news is that survey results suggested the trend may be starting to bottom out. Forty-three percent of the respondents expect to maintain about the same number of stores in the coming 12 months.

Even more hopeful—and in what the study said may be the first signs of a turnaround—the results indicate that more than one-third (37%) of participants plan moderate to aggressive expansion in 2010. By category, the most optimistic in this regard are big-box stores, discounters and supermarkets.

That is not to say or even suggest that retailers will be free with their capital in 2010. Cost reduction/containment and customer satisfaction/retention, which ranked as retailers’ top strategic initiatives in 2009, remain top of mind for 2010 (with product differentiation, employee retention and ensuring adequate liquidity rounding out the top five).

In other findings:

• Nearly half of the respondents report that Web personalization applications will be a major investment priority for 2010.
• IT outsourcing is dominant. Only 14% of respondents said they did not outsource any IT initiatives, with the most common outsourced functions being application development, application housing and customer-facing call centers.
• One-quarter of respondents plan to introduce new customer relationship management systems in the next 18 months.
• Nearly 60% of those polled indicated they plan to expand their online offerings to include customer forums and customer review pages. In addition, two-thirds would like to develop a specialized widget that would allow a heightened level of customer interaction on their social networking sites.

The 2009 Retail Horizons study is comprehensive in its research. For more information, go to nrf.com.

I couldn’t pass up the opportunity to put in a good word for Chain Store Age’s 46th annual SPECS Conference, March 7-10 at the Gaylord Palms Resort, Kissimmee (Orlando), Fla. SPECS has stood the test of time and with good reason: The educational program is second to none, and attendees also benefit from the chance to learn from, and network with, their peers.

SPECS is designed specifically for executives in store planning and design, construction and facilities management. Make sure your chain doesn’t miss out. For more information, go to specsshow.com.