RetailNet Group CEO addresses retail survival in 2010 at NACDS Marketplace

BOSTON Not only is the economy on the skids and bringing retail sales down with it, but there is a generation rotation taking place in the modern trade, all of which means that retailers must stay ahead of the curve and adapt to change in order to survive. That was a key message RetailNet Group CEO Dan O’Connor had for attendees of Tuesday’s morning business session.

During his presentation, titled “Survival Retailing 2010,” O’Connor set the stage by explaining how, historically, retail sales have grown about 5%, but in today’s current economy, that growth is nonexistent as people are spending less and their purchasing power shrinks. To top it off, shelf prices are falling as retailers shift more of their focus to private label, and cash-strapped consumers increasingly migrate away from premium stores to discounters.

O’Connor also told attendees that, looking ahead, the Web likely will lead to in-store category reduction and that the future of retailing will be more about services versus merchandise. A perfect example: retail-based health clinics. “The clinics are perhaps the most important thing [being done] in this industry in a long, long time in terms of the impact it will have on the underinsured and the availability of health care,” O’Connor said.

Meanwhile, there’s a generation shift taking place at retail, which O’Connor likened to beer drinking. Think about it, O’Connor said: When people are young, they are much more experimental and will try anything (to get their hands on that beer), but as people grow older, their eagerness to try new things narrows. This next generation, which relies heavily on word-of-mouth and lives on the Web, is arriving.

O’Connor suggested that, in order to thrive, retailers must “win search.” Today’s shoppers are precise in their buying habits and expect to find retailers on the Web, a listing of products and the price. This is especially important given the ease of using online price-comparison tools.

The fundamental question is: How long will this economic environment last?

“There is no indicator that tells us we will be out of the woods in the next 12 months,” said O’Connor, who thinks it will be more like at least 18 months. “… We suggest it will be a 36- to 48-month cycle from beginning to end when we will see back-to-back quarters [of rising retail sales].”