Inside This Issue - Opinion
Retailers have to cope with uncertain world
May 16th, 2011
Results of a new survey that involved 152 financial managers at global retailers offer reason to think the worst effects of the Great Recession are past, and that the industry will deliver improved results as the year unfolds.
The research, conducted by KPMG International, reveals that the executives expect rising consumer demand to drive better financial performance in 2011. Twenty-four percent foresee “significant increases” and 51% anticipate “some increase.”
Asia and the United States are the markets where the greatest growth is predicted, with 49% of the executives citing the former and 48% the latter. Latin America, at 44%, and India, at 40%, follow.
The report does, however, cite a note of caution. Fifty-eight percent of those surveyed indicate that it will be difficult to raise prices in the current business climate, and 41% say their companies will have trouble maintaining profit margins.
Those concerns point to the uncertainties stemming from an uneven economic recovery, an international market where the balance of relative buying power is shifting and high energy costs. Prices of oil and other commodities are up, prompting 56% of the financial executives to cite the cost of merchandise as a threat to margins. Forty-seven percent have concerns about the impact of discounts and other measures designed to drive sales increases.
Like retailers, consumers are buffeted by conflicting influences. For every optimistic report about economic prospects that appears, it seems there’s another that comes to the opposite conclusion. For instance, a survey of Americans conducted by Citibank that was issued shortly before the KPMG study shows increasing worry about the economy. The “optimism index” fell six points to a minus 12, retreating to a level not seen since last year. That doesn’t bode well for retail sales.
The reality is that no one can be sure where things are headed. Such recent events as the upheavals in the Middle East and North Africa, the earthquake and tsunami in Japan, and tornados and floods in the southern United States demonstrate how retailers and their suppliers can be affected by forces beyond their control. Coupled with the still fragile state of the economy, the challenge of running a company is tougher than ever. The bottom line is that retailers will have to learn to live with uncertainty and be prepared to respond quickly to any contingency.