Retail Feels the Pain

Going%20Going%20Gone.jpgFor a few retailers, there will be no Christmas at all. This year several have announced closings and associated "going out of business sales." Shoe Pavillion, a 64-store retailer that has been in business for 29 years, is closing all its stores. Mervyn's Department Stores , which had 169 locations, has filed for Chapter 11 bankruptcy and is liquidating its merchandise. Linens 'N Things is busy liquidating its remaining 371 stores. And Circuit City announced it is considering the closure of 150 of its stores to avoid bankruptcy.

When the economy is booming, there's room for both good and bad retailers. But when consumer spending slows, only the best retailers are left standing. Some retailers are a victim of trends or the changing tastes of consumers. Others entered into ill-advised leases at the real estate market's peak. Still others just can't compete in saturated markets, so its a race to see who can last longest.

The retailers I've seen thrive in up and down economies have a few things in common:

1. They are constantly testing different ideas, like alternate store formats, new advertising campaigns, and complimentary products. Risk-taking is rewarded, regardless of the outcome. Good businesses know that their will be some failures along the path to success.

2. They are always reducing costs, especially in IT. But they know that sometimes in order to reduce long-term costs, they must invest in modern software and infrastructure. The CIOs that can't find the time to think strategically are destined to a career of tactical fixes. Firefighting should be the exception.

3. And above all, the best retailers know their customers. Information is the cornerstone of any business. The retailers that are able to collect and analyze customer trends are able to make faster, more accurate merchandising decisions. The right mix of art and science will maximize profits.

Retail is a tough business.

Comments:

For what it is worth, Circuit City has not made any announcements about closing stores. The Wall Street Journal published an article saying that Circuit City was looking at doing so, and other news outlets picked that up and reported on the fact that WSJ was reporting it.

As for #2, there are some good points. I think that one key is to know the difference between a "good" IT spend and a bad one. The bad can often push out the good. Especially since "good" can appear subjective from a distance.

Posted by Rob on October 26, 2008 at 11:30 AM CDT #

Agree that CC is only considering store closures, as many other retails are likely doing as well. And not all retailers are loosing money. Radio Shack, Amazon, and Kroger seem to be doing fine. Everyone can expect greater scrutiny for all expenditures.

Posted by David on October 27, 2008 at 02:32 AM CDT #

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David Dorf, Sr Director Technology Strategy for Oracle Retail, shares news and ideas about the retail industry with a focus on innovation and emerging technologies.


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