World Retail Congress 2009

Speaking at last year's World Retail Congress, retail tycoon Sir Philip Green, head of Arcadia and Bhs, told delegates the sector was to face an "acid test". Green said: "Now it's dark out there, let's see who can find the light at the end of the tunnel. In easy times, we get carried away. Now we're going to discover if what we are doing has stability and legs."

He was right. The economic crisis has resulted in high-profile retail casualties and has impacted deep into the retail supply chain. More than one year later, global retail leaders and industry experts gathered for the third and final WRC in Barcelona before the event moves to Berlin next year.

Speakers at the WRC, including heavyweights from Deloitte and Mirae Asset, predicted the recession would begin to end in late 2009 with the US and China dragging the world out of the downturn.

· Some economists already see green shoots although Deloitte's Dr Ira Kalish said the economic crisis will have a lasting effect on the retail landscape, with fewer major retailers in each channel.

· The US will see its economy experience structural change, moving away from a consumer spending model towards one focused on exports, investments and government spending.

· Until recovery begins to bear fruit retailers are having to navigate precarious situations. However the feeling among delegates was that the big shocks have happened. There was optimism that the worst is now over; global retailers felt they are at least able to plan for the future, with better visibility of the situation they and their companies face.

Consumers are making long-term changes in attitude as a result of the recession. David Roth, CEO of WPP's The Store, said the consumer has been through three stages of grief brought on by the worldwide recession: rage and acute distress; acceptance; and moving on.

Retail has become more about educating consumers as shoppers seek out ways to validate the shopping experience.

Jim Stengel cited a tie-up between US retailer Ann Taylor Loft and Procter & Gamble. The retailer, recognising that the trend for disposable clothing was over among customners, sought out a way to help shoppers create new outfits from investment pieces they already had. Part of that involved the reuse of clothing. The retailer worked in P&G's washing detergent brand Tide to promote its new Total Care products, including endorsement from Tim Gunn.

Instead, it is being replaced by a model based on social engagement, according to Michael Jary, worldwide managing partner at OC&C Strategy Consultants.

· Consumers have a desire to have an emotional engagement to the purchase process, he argued. Brands and retailers should therefore adjust to this consumer desire and change the way they develop.

· Matt Rubel, president and CEO of Collective Brands Inc, which runs US footwear retailer Payless ShoeSource, cited the example of eco range Zoe & Zac, which targets a 16- to 30-year-old customer. As the collection ties into issues that this consumer group cares about, it commands a 12% higher price than other brands.

· In another example, the company's prosaic dyeable shoe offer was rebranded from 'custom colour' to 'moment of celebration and unforgettable moments', focusing on weddings and proms. It was designed to replicate a cosmetics display in store, and in-store designer Leila Rose validated the 64-colour palette. Prices went up but sales grew by 150% in the first 90 days. Rubel said: "The strategy that we use is this: we build platforms for our brands that tie in with emotional occasions in people's lives".

During the slowdown, the aspirational customer can no longer afford - or no longer even wishes to aspire to - luxury, she continued. As a result, the brands that catered for that market will suffer, but at the same time the luxury market is "going back to haute couture and its principles" of personalisation, artisan-made, exclusivity and quality.

Consumers still want luxury products, but are not prepared to compromise on a 'halfway-house' of a pseudo-luxury brand. Consequently, brands such as Hermès, Burberry and Prada will still be desirable, as consumers prefer brands with a recognised, authentic heritage.

The notion of trading up that was popular before the recession is also still continuing now, said Lanciaux, but now raising the price of goods as well is no longer possible. "Trading up means removing fake," she added. "Consumers today prefer to buy semi-precious stones rather than zirconium."

The retail journey is becoming more fragmented. Consumers are moving between online research, social networking sites, mobile networks and stores before they purchase. According to research presented by IBM, 50% of UK consumers and 46% in the US switch from store to internet when purchasing from a brand.

Borders Inc CEO Ron Marshall said: "It is about having a conversation and building a relationship with the customer online that feeds back into the stores. You need to take each medium, look at its specific strengths and play to those. Online content reaches out and touches people, in-store you can stage events that bring those people in to your stores in a different and very real way." The retailer holds music and author evenings in stores, which evolve through online book and music clubs. Events such as its midnight Twilight club, where it opened at midnight on the day the teenage vampire movie was released on DVD, led to more than a million hits on social networking sites. "You can talk to customers in a way that no one else can - it's incredibly impactful," he said.

Understanding the role of retail in a local or regional market and adapting to suit local needs can pay dividends for a wide range of retail businesses and formats.

Vittorio Radice, CEO of Italian department store chain La Rinascente, said: "With stores in some of the world's most beautiful cities it's important to realise you are part of the fabric of their being and that you should try to give value to that by making your store in some way unique to its location. It is then that you can start a winning formula for your business." US consumer electronics retailer Best Buy, which has expanded into Canada, China, Europe and Mexico, focuses on 'local' in its approach to customer-centric retailing. Bob Willett, CEO of Best Buy International, said the retailer analyses local demand to co-create (with customers and the local team) services and solutions for that market.

According to a Havas 2009 survey of 22,000 consumers across 10 markets, consumers are still concerned about sustainability and are not losing sight of the issue despite economic pressures. Four-fifths of those surveyed would reward rather than punish brands that adopt sustainable practices; almost half (48%) are prepared to pay more for sustainable product; and two-thirds would go out of their way to find out more about companies' social and environmental practices.
"It is fundamental, not elemental to business," said Champniss. A firm's ability to thrive and survive will depend on the integration of sustainability across traditionally siloed company structures. One approach is to recognise sustainability's similar characteristics to IT: it is inherently horizontal, it has the potential to become universal, and it is a basic business-driver adding to brand value, just as IT has done. "

Although bruised and battered by the economic events of the past year, retailers were reminded that crisis can create advantage. Dr William Fung, managing director of the world's largest sourcing company, Li & Fung, explained to delegates that the Chinese character for crisis is the same as the one for chaos, and includes two elements - one meaning 'danger' and the other 'opportunity'.

Ref: A.CARR, L.HALL, A.JOBLING, A.RUMSEY, J.WARKENTIN
28.05.09. WGSN