Retailers need to respond to the recession by changing with consumers

Retailers are grappling with the toughest trading conditions of their lives and while consumer confidence is improving there are risks to a recovery, the head of Britain's biggest retailer said on Thursday.

"The situation in the high street is very fluid at the moment," Tesco's (TSCO.L) chief executive, Terry Leahy, said in a speech to the British Retail Consortium on Thursday.

"Confidence is slowly seeping back, helped by lower interest rates, energy and fuel deflation, and of course falling food prices. But clouds remain -- the darkest being unemployment."

Leahy said retailers needed to respond to the recession by changing with consumers, who are focusing more on value than other recent shopping trends such as convenience.
"It may demand short term pain -- such as investing in lower prices -- but it delivers medium and long term gain," he said, pointing to the market share gains that Tesco made after the recession of the early 1990s when it developed its "Value" range.

In the current downturn Tesco has introduced a new range of discount brands and invested more money in its Clubcard customer loyalty scheme.

Leahy said consumers had remained concerned about the environment in the recession and that trend towards "green" shopping would become stronger in a recovery.
"When the recovery comes long term challenges and trends will come back into focus," he said, highlighting climate change, a rising population, the pressure on natural resources and an ageing population.

"Technologies that once were unfashionable and politically unacceptable -- be they nuclear power or GM (genetically-modified) crops -- may come back into vogue," he forecast. (Reporting by Mark Potter; Editing by Greg Mahlich)