COMMENT: Doom and gloom clouds retail skies
The World Retail Congress in Barcelona has entered its final day today (11 April) and the cloudy skies over the Spanish city seem to reflect a downbeat atmosphere among the attendees. An underlying feeling of doom and gloom is swirling around the retail sector and not even the promise of emerging markets has fully lifted the mood. Dean Best reports.
As the World Retail Congress draws to a close here in Barcelona today (11 April), the cloudy skies seem somewhat appropriate.
The conference is one of the highlights on the retail industry calendar but, after listening and meeting some of the leading players in the sector, one gets the impression that there are clouds gathering on the horizon.
There is an underlying feeling of doom and gloom about the prospects for the retail sector. The global credit crunch, the downturn in the US and concerns over rising commodity costs have even got the bosses of some of the more robust food retailers concerned.
Carrefour CEO Jose Luis Duran attempted to talk up the "opportunities" available for growth; focusing on brand-building, on innovation and, a favourite among many in the FMCG sector, on investing in the world's emerging markets. But he warned that retailers are facing "significant challenges", perhaps the most pressing for a generation.
The development of emerging retail markets was one of the predominant themes of the conference. Both multinational and home-grown retailers spoke of the lucrative growth opportunities available to those who invest in markets like Russia, India and China.
Retailers are hoping that those markets, mainly the BRIC economies, will provide some respite to the housing downturn in the US and the UK, weakening consumer confidence and the generally more saturated markets of the West.
However, Carrefour's Duran admitted that even China, that most promising of emerging markets, is facing problems of its own, with food inflation approaching 25%. Growth in markets like Russia, India and China is set to slow and, with the retail scene in those countries becoming ever-more competitive, those "opportunities" will likely prove harder to come by.
There were notes of optimism elsewhere. Rajan Bharti Mittal, MD of Indian conglomerate Bharti Enterprises, has only recently decided to move his business into retailing. He believes India is ready for the "retail experience" and said the country is seeing a "gold rush" in the sector. Mittal even brushed off concerns over fierce local hostility to the growth of organised retail - opposition that has led to street protests and store closures.
Each of the BRIC markets has its own unique challenges, a message that Spar International MD Gordon Campbell was keen to get across. "One may get the impression that all these emerging markets are the same; they are actually very different," Campbell said, citing low expenditure and the importance of price in China, demand in Russia for higher quality and a wider range of goods, and the high level of investment needed to break into India. "There are a lot of problems and issues in these markets," Campbell said.
There was, of course, also much discussion on the problems and issues in the US, which after all, remains the world's largest consumer market. US retailers are feeling the pinch from the economic downturn across the Atlantic, with a number scaling back their expansion plans and some selling off stores. Paul Charron, a retail veteran with apparel chain Liz Claiborne, looked across the entire US retail sector and predicted a round of consolidation. "Too many US retailers have been hanging on for a long time and in the current consumer environment, there is simply no place to hide," Charron warned.
The retail sector is facing some stormy weather. Charron, a former US naval officer, was downbeat about the prospects for US retailing in the short term, saying companies will have to navigate some "rough water". However, with the global economic outlook uncertain, those problems extend further than US shores and the retail executives who met in Barcelona would have left with the feeling that testing times lay ahead - even in markets like China, which it is hoped, will provide a safe haven from any buffeting from economic headwinds.
Those hoping for brighter skies may be disappointed.
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