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Has the Sky Really Fallen?

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The National Retail Federation's annual convention is taking place this week in New York, and one of the roundtable sessions was called, "The Sky Has Fallen, Now What?"

For the uninitiated, the NRF is the industry trade group for the world of corporate retailing, and to be fair, this past holiday selling season has been called the worst since 1969, and retail bankruptcies are expected to continue unabated through the first quarter. Still, has the sky really fallen?

Perhaps it has for the world of corporate retailing. Peter Solomon, founder and chairman of Peter J. Solomon Company, an investment bank in New York, recommended during the NRF session that retailers focus on nothing but cash. "I wouldn't worry about anything else for the next year," he said. "You are selling on a survival basis and you have to survive... Don't worry about investing and if you survive, you'll somehow figure it out a year from now."

I wouldn't for a minute disagree with Mr. Solomon that cash is king in this environment. If you have cash, you can look to tomorrow. If you don't, you're looking into the abyss. Nor would I necessarily disagree with his advice to his corporate retail audience, many of whom are staring at business models that have led them onto the slippery slope of competing strictly on price over a basket of commoditized products.

Consider, however, the December sales results of Buckle, Aeropostale and Hot Topic. Amidst the doom and gloom, these specialty retailers generated comp-store increases of 13.5 percent, 12.0 percent, and 4.3 percent, respectively. Each are narrowly focused on a carefully defined fashion apparel niche, competing not on price, but by appealing to the distinct lifestyle and aspirations of their customers.

Yes, cash is king. But for small, entrepreneurial retailers, this is a rich moment, full of opportunities, for fresh thinking and innovation. Customers haven't stopped spending; they're just spending less, and are more discriminating about what they are spending their money on. Clearly, across much of their basket value is critical, but for creative entrepreneurs there is a real opportunity to captivate customers with stores, products, and experiences far removed from the me-too world of corporate retail.

The sky hasn't fallen. At the moment, there may not be a lot of capital available for rapid expansion of new retail ventures, but the time is ripe for many small, entrepreneurial retailers to incubate new ideas, develop and refine new strategies, and engage and captivate new customers. The innovators of today will be the ones addressing very different retail roundtables in the future.

Last updated: Jan 15, 2009




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