Jun 26, 2011
Retailers scout new paths in shaky times
Jun 26, 2011
CHICAGO/LONDON | Sat Jun 25, 2011 - Retailers and the companies that provide their wares are searching for new ways to grow as shoppers are still not confident enough about the economy to open their wallets and spend.
Executives speaking at the Reuters Consumer and Retail Summit, which begins Monday, will discuss what the current climate could mean for the important holiday season, when chains typically ring up the bulk of their sales. They will also talk about the prospects for deals in the sector, where there has been buzz about takeovers and public offerings.
From higher food prices around the world to fresh austerity measures in Europe, the bleak economy is on people's minds.
In the United States, where consumer spending accounts for roughly 70 percent of the economy, consumer sentiment fell in June as risks surrounding Greece's economic plan spooked global markets.
"There's just been some wild fluctuations, just within the first quarter, of how consumers are viewing the economy," said Bill Tancer, general manager of research at Experian Marketing Services. "A lot of consumers don't know what to think."
Experian's Consumer Expectation Index, based on weekly surveys, rose to 96.8 in January, its highest reading in three years, and then fell to 87.8 in March, he said.
Weakness in the U.S. economy has also pressured investments in the retail and consumer products sectors.
Returns at funds focused on consumer goods, and consumer and retail companies providing services, fell in recent weeks according to data from Lipper, a Thomson Reuters company that tracks mutual fund data.
Retailers' stocks have lagged the broader market so far this year. While U.S. chains have started to gain some ground, their European counterparts continue to lag.
"Retailers are having to work really hard to create events and occasions for shoppers to really come out and spend," said Natalie Berg, co-global research director at Planet Retail.
From lululemon athletica Inc (LLL.TO), which hosts yoga classes in its stores, to Ulta Salon Cosmetics and Fragrance Inc (ULTA.O) offering free gifts and samples with purchases, chains are doing whatever they can to lure shoppers.
It could be a particularly harsh winter for chains selling toys. In China, toy makers said that they are seeing holiday season orders decline. At the same time costs are rising, adding pressure during their crucial time of the year.
A recent Reuters straw poll of 18 small China exporters found 67 percent expected orders to fall or remain the same in 2011, while 33 percent expected growth of 10 to 20 percent, partly because of demand from emerging markets such as Brazil, India and Southeast Asia.
In general, sales are rising in most G8 countries, but growth in developed nations has been unsteady.
European shoppers are cutting back on purchases like televisions and have a sharp eye for food priced at a discount, fueling fears the region's faltering economic recovery could slide into reverse.
Chains including Asda, the British arm of Wal-Mart Stores Inc (WMT.N), Tesco (TSCO.L) and John Lewis' JLP.UL Waitrose are grappling with higher commodity prices and, like their U.S. counterparts, are doing whatever they can to cut costs so that they are not forced to raise prices too much.
Companies are trying to find fresh ways to grow, even using ideas from smaller countries to try to ignite growth in established locales.
Wal-Mart, the word's largest retailer, is using Asda's online grocery expertise to test U.S. delivery and taking its Latin American Bodega stores as inspiration for the new Walmart Express small format in the United States, Berg noted.
(Additional reporting by Dhanya Skariachan in New York, James Davey in London, and Alison Leung and James Pomfret in Hong Kong, editing by Matthew Lewis)
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