"Consumers and retail companies are still reeling from the fallout of the 2008 whose aftereffects continue to reverberate through the consumer economy. To ensure that companies aren’t caught unware the next time recession hits the world, Deloitte, which provides audit, tax, consulting, enterprise risk and financial advisory services, surveyed the trends defining the winners and losers in past recessions to inform future-proofing strategies that retailers can leverage to weather another contraction."
Consumers and retail companies are still reeling from the fallout of the 2008 whose aftereffects continue to reverberate through the consumer economy. To ensure that companies aren’t caught unware the next time recession hits the world, Deloitte, which provides audit, tax, consulting, enterprise risk and financial advisory services, surveyed the trends defining the winners and losers in past recessions to inform future-proofing strategies that retailers can leverage to weather another contraction.
Ignoring the digital power
As per the survey, most businesses impacted by the Great Recession underestimated the “degree to which the structural change of the industry accelerated during this period.” This structural change includes digital and e-commerce initiatives. Online sales drove most of retail’s growth throughout the economic collapse. Also the web outperformed expectations besides laying the foundation for new vertically integrated and digitally native brands to crop up, stealing market share from entrenched incumbents.
Retailers, during the period also had to contend with the emergence of discount and off-price players newly resonating with value-conscious consumers. Retailers who reinvested at high rates during the Great Recession witnessed a four-year combined annual growth rate of 7.9 percent.
Creating a defense wall
To ensure that the next recession doesn’t sink them altogether, Deloitte recommends retail companies to double down on a
value proposition that serves either the high or low segments of the consumer market. They should also stockpile a “war chest” for recession-time investing. Getting rid of underperforming assets, reviewing existing debt levels and focusing on only the most strategic capex projects can free up funds for reinvestments. This can be achieved through tweaking fulfillment operations and store formats to implementing innovative digital technologies, diversifying capabilities and acquiring a new customer base.
Aligning human capital with digital technologies
Deloitte highlights, retail companies cannot defer investing in robotic process automation much longer, especially as labor costs continue to climb and technology is getting comparably cheaper. They should instead align human capital with advancing digital capabilities as co-investing in talent and technology can be a powerful partnership.
Retailers should also consider brand-building partnerships and planning jointly with suppliers and other stakeholders. Ferret out supply chain overlap and inventory inefficiencies and tightly integrate pricing and markdown strategies, Deloitte recommended, adding that siloed consumer data yields stronger insights when unified.
