Retailers will need to adapt quickly to address new marketplace realities

With consumer spending projected to continue its downward momentum in 2009 and shifting shopping habits expected to linger, retailers will need to adapt quickly to address the new marketplace realities, according to a new report from PricewaterhouseCoopers LLP (PwC) and Retail Forward, entitled Point of View: How Will This Recession Affect the Future of Retailing? The report includes findings from Retail Forward's monthly ShopperScape(tm) survey, Retail Forward's retail sales forecasts and an analysis of how trends first profiled by PwC and Retail Forward in Retailing 2015: New Frontiers are evolving.

According to PwC, retailers and suppliers must not only recognize that the tried and tested may no longer deliver results, but they must also manage the complexities of the new retail landscape.

``The relative winners on the retail battlefield in recent months are already proving the relevance of the emerging retail trends that we identified in Retailing 2015,'' said John Maxwell, PricewaterhouseCoopers U.S. retail and consumer practice leader. ``Packaging, store footprint and growth expectations will downsize going forward.''

The Point of View report finds that retail sales growth will remain flat in 2009. The retail outlook is expected to improve by 2010 when sales growth across all retail sectors-food, drug, mass (FDM); homegoods and softgoods-is expected to rebound. However, growth will remain below the 5 percent inflation-adjusted pace averaged in the 10 years prior to 2008.

``Retailers will need to recognize that future growth will come from tailoring existing stores to specific customer segments and local markets as opposed to adding stores,'' said Lisa Feigen Dugal, PricewaterhouseCoopers U.S. retail and consumer advisory leader. ``They need to adopt more creative strategies such as breaking the 80/20 rule with more limited editions and small runs to generate shopper excitement.''

In assessing the near-term growth prospects, the report finds that the FDM channels will fare better than others. But, the sales growth rate for the combined channels is projected to slow to 2.4 percent in 2009, an almost 3 percentage point decline from the annual average rate tracked during 2003-2008. Supercenters and warehouse clubs are expected to generate the strongest sales growth, while discount department stores and supermarkets will be the weakest performers.

According to the report, the housing market collapse will continue to dampen sales growth in the combined homegoods channels, and nominal sales growth will decline by 3 percent in 2009. The softgoods sector will be the hardest hit and slowest to recover. It will rebound in 2010 but still lag supercenters, warehouse clubs, e-commerce, and non-store retailers, all of which compete for spending in softgoods categories.

``Near-term shifts in shopping habits resulting from this economic crisis could significantly alter the consumer mindset in the long-term. This shift will give evolving retail trends greater momentum and retailers and suppliers will have to closely monitor and manage the complexities associated with these changes,'' said Mary Brett Whitfield, Senior Vice President at Retail Forward.

For more information and to download an electronic copy of Point of View: How will this Recession Affect the Future of Retailing? visit http://www.pwc.com/us/retail or http://www.retailforward.com.

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