For retailers who weathered the pandemic storm, the lull has been short-lived, and they’re now battening down the hatches again in the face of the next assault – the predicted global recession. Driven by the impact of the pandemic, the war in Ukraine, hikes in energy and food prices, and worldwide inflation, the world ‘may soon be teetering on the edge of a global recession’ says the International Monetary Fund (IMF).
The definition of a recession, according to the National Bureau of Economic Research, is a ‘significant decline in economic activity spread across the economy, lasting more than a few months.’
That decline may manifest across the economy as low unemployment, rising prices and squeezed margins. In retail specifically, the world tends to be divided into essentials and luxury items. Consumers continue to spend on essentials such as food, personal care, and basic clothing, but reduce their outlay on items such as furniture, home electronics, sporting goods and accessories. Retailers across the board are impacted by a scarcity of staff, a factor that will only be heightened in this coming recession by the ‘Great Resignation’ pandemic phenomenon in 2021.
Recessions have a tendency to widen the chasm between those retailers who are effective operators with inbuilt resilience, and those who can get by in good times, but struggle when the going gets tough. As Deloittes puts it: ‘recessions expose existing weaknesses’, but those who ‘grasp the challenge…could well emerge stronger and provide a brighter future for employees, customers, and stakeholders alike’. This is borne out by evidence from previous recessions, where companies who took the opportunity to invest during the tougher times grew faster once the recession was over.
McKinsey’s research into the way that retailers managed cost reductions in the Great Recession of 2007-2009 found that ‘resilient retailers’ reduced their costs by two percentage points, while their ‘non-resilient’ counterparts increased theirs by the same amount.
How can retail technology help retail stores to prepare for recession?
Based on what we know from previous recessions and the way in which retailers’ actions and approaches affected their performance and recovery, it would seem that the key focus areas for retail strategy in 2022 must be:
Retail technology can help to deliver on these goals
Retail Technology: Efficient in-store operations
There is no doubt the next months (or years) will be tough for retailers. But those who get the right strategies in place now, supported by the best retail technology, will be building in resilience, and increasing their chances of weathering the recession storm.
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