By  on May 19, 2009

BARCELONA — There may be “green shoots” in the global economy but the consensus at the World Retail Congress here was that the retail sector had some way to go before returning to bloom.

Many delegates at the third edition of the event, which ran May 6 to 9, expressed uncertainty over the future, describing the recession as the worst they had experienced. Some predicted the industry could weather another 18 to 24 months of turbulence before making a full recovery — and even then not to previous levels — despite renewed forecasts the U.S. economy could start to grow again by the end of this year, followed by China.

With consolidation inevitable and restructuring or liquidation a looming threat, retailers said they were focused on survival and how to stimulate consumer spending. This meant disciplined cost control and inventory management; working harder to create a compelling value proposition for the consumer; focusing on the shopping experience, particularly service; aligning communications and exploring new channels, and having the courage to innovate. The message was clear: adapt or die.

In a keynote address, Marvin Traub, president of Marvin Traub Associates and former president and chief executive officer of Bloomingdale’s, said it was incumbent on retailers to understand the “fear as well as guilt that has gripped the consumer” and “create a more positive attitude for the consumer as well as our business.”

“Value is the priority, not necessarily inexpensive or sales, but consumers will focus on products with superior quality and functionality at an accessible price,” Traub said, extending this thesis to luxury.

“In recent years, the prices of luxury goods have skyrocketed to levels that are no longer sustainable. Now we are in a new era,” Traub said.

Accordingly, he called for high-end retailers and luxury brands to work together to reevaluate pricing strategies and the role and importance of secondary lines.

Concetta Lanciaux, ceo of Switzerland-based Strategy Luxury Advisors, dismissed the notion that pricing of luxury goods had been compromised, saying rather, “If there’s one single moment affecting our business, it’s trading up.”

She explained that “copycat luxury” or “bubble” brands would adjust their prices down now — and be exposed for having overcharged by doing so — while “true” luxury brands would hold or even increase prices and add value by upping quality and innovation.



Deloitte’s Janiak said consumers of all means were wearing cost consciousness as “a badge of honor” and anticipated that department stores would respond to the shift to value from brand by launching their own private labels.

Harvey Nichols ceo Joseph Wan said the U.K.-based specialty store was “in the early stages” of doing just that, developing women’s and men’s apparel, leather goods and shoes under the Harvey Nichols label, which it would launch “in the near future.” Wan said Harvey Nichols would also allocate marketing spend for the first time to targeting tourists and widen its offer to 15- to 20-year-olds.

Financo Inc. chairman Gilbert W. Harrison said: “[The market is] overstored, overbranded and overpriced.”

As a result, market conditions would create investment opportunities for retailers with access to capital, delegates said.

Forever 21 ceo Christopher Lee said the U.S. fashion brand was looking to open a large-scale unit on London’s Oxford Street as the first step in a possible expansion into Europe. “It can’t be a small box. We need to create some kind of presence,” he said, adding the company had yet to identify an appropriate site.

Forever 21 is also targeting empty department store space in the U.S. “Because of the deals we can strike, we get very good value per square foot and that allows us to experiment with new product lines,” Lee said.

Harrison said funding was available for companies with “strong brands and profitable business models,” citing American Apparel Inc. and Tiffany & Co. as recent examples, but that the nature of deals would change.

Dr. William Fung, managing director of Hong Kong-based sourcing giant Li & Fung Ltd., warned against protectionism and called for governments to match their rhetoric with action, allowing the free flow of trade. He also anticipated price deflation of between 5 and 10 percent this year due to falling commodity prices.

“This is not good news for the supply side but it is good for retailers operating in this difficult environment,” Fung said.

Ajay Kapur, chief global and Asia strategist at Asian financial services firm Mirae Asset, said long-term growth would come from emerging markets, where the status-seeking middle class is set to rise to 16 percent by 2030 from 5 percent. Delegates cited opportunities in China, Korea, Southeast Asia, India, the Middle East, Russia and Turkey, particularly in second-tier cities.

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