By  on January 14, 2009

NEW YORK — Hunker down, adopt a bunker mentality, hoard cash and control expenses.

That was the advice for retailers at the National Retail Federation’s 98th annual convention and expo during Tuesday’s Super Session, “The Sky Has Fallen: Now What?”

“I don’t see positive growth in ’09,” said J.C. Penney chief executive officer Myron Ullman 3rd. “Sometime in 2010, we might start to see growth again.” Cutting capital expenditure, being more prudent with inventories and adopting shorter lead times will help retailers survive this difficult period, he said.

“We can’t give up on ’09, but it’s going to be a nightmare,” said Peter J. Solomon, founder and chairman of the Peter J. Solomon Company. “Retailers going bankrupt today are going to be liquidated because the demand for retail space isn’t there.”

Mark Zandi, chief economist and co-founder of Moody’s, said there’s no easy fix for the economy. “The next six months will be very painful, the six months after that will be merely painful and 2010 will be uncomfortable. I wouldn’t execute on revenue opportunities until 2011.”

Among the concerns raised was the specter of inflation. “There will be massive inflation in three to five years,” Solomon said. “The government can’t keep printing money at this rate.” At the same time, apparel costs will rise. “As the developing world starts to be more consumer-oriented, the cost of our goods will go up. Apparel costs are up 8 to 10 percent in China.”

Attitudes toward spending will change. “Over the last 25 years, the net worth of high income households increased,” Solomon said. “That’s not going to happen. Nest eggs aren’t going to be as big.”

Ullman noted that Americans’ loss of net worth has been $10 trillion since the economic downturn began. The nation’s housing stock has lost $30 trillion in value. “That has a big effect on the psyche.” Solomon agreed, calling the loss of jobs, foreclosures and bankruptcies “psychologically scarring.”

What will it take to get emotionally battered consumers back into stores? “Confidence,” said Zandi. “From a consumer’s point of view, a stimulus package that’s big enough and fast enough,” said Ullman.

Solomon suggested nationalizing banks and using bailout money for foreclosure mitigation to keep people in their homes.

No one should be too surprised the good times are no longer rolling, but rather, amazed at how long they lasted. “This is the end of a long run that’s lasted since post-World War II,” Solomon said. “Retailers kept getting easy money to expand. The world ran out of ideas in retailing. This is just a huge wake-up call.”

Later, at the annual industry luncheon, Michael S. Jeffries, ceo of Abercrombie & Fitch, accepted the NRF gold medal award and Nick Badminton of South Africa’s Pick ’n’ Pay Stores picked up the international retailer of the year award. “The economy is in turmoil, the world is reeling and the end is not in sight,” Jeffries said. “So what do we do? We trust each other. We trust in our business partners. Working passionately will bring us back to more promising times.”


To Read the Full Article

Tap into our Global Network

Of Industry Leaders and Designers

load comments
blog comments powered by Disqus