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US retailers must invest to beat recession-Deloitte
January 12, 2009 / 9:37 PM / 9 years ago

US retailers must invest to beat recession-Deloitte

NEW YORK, Jan 12 (Reuters) - U.S. retailers aiming to survive the recession, and perhaps gain ground when the economy recovers, will need to invest in everything from new tools for customer service to information technology, experts with consulting firm Deloitte said on Monday.

U.S. store chains from Best Buy Co (BBY.N) to Dillard’s (DDS.N) have cut jobs or pared store growth to salvage profits in the worst financial crisis since the Great Depression. But healthy chains recognize the need to go beyond belt-tightening and embrace new ways of running their business.

“This downturn, while difficult, does provide opportunity for retailers to become more competitive and increase market share,” Stacy Janiak, U.S. retail leader for Deloitte LLP, told the National Retail Federation’s annual conference held in New York.

Janiak said retailers who stay the course and ignore investments in strategic IT programs will not be equipped to lure consumers who are both seeking value and information.

For instance, even as retailers slow their hiring, they can still train workers to provide a better shopping experience, she said.

“Even though you may be reducing your workforce today, you must invest to ensure that those who remain are well-equipped to continue with customer centricity and deliver that desired shopping experience,” Janiak said.

Carl Steidtmann, chief economist of consumer business for Deloitte Research, said even as retailers grapple with the current no-growth environment, a host of factors will make retailing yet more difficult in the years ahead.

These include a growth in older consumers who typically don’t have high levels of spending, downsizing of the housing market and an expanding population in urban areas.

“We are in the midst of a great transformation ... that will create a very different economy,” Steidtmann said. “And no industry is going to be more affected than retail.”

He said decreasing consumer credit and restrictions on lending will limit retail expansion and lead to more bankruptcies and consolidation. But unlike the past, many retail chains won’t emerge from bankruptcy in this cycle, he said.

Economic recovery, when it comes, will not be driven by consumer spending as it has been traditionally, but by businesses bringing manufacturing back to the United States, rising global exports and more government spending.

“We’re going to see a dramatic increase in the role of government, not just in terms of its regulatory structure but also in terms of its spending level in our economy to a degree that we have never seen before,” Steidtmann said. (Reporting by Karen Jacobs; editing by Richard Chang)

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