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Retailers advised to rethink in changed landscape

Business Week

- Monday, January 12, 2009

Retailers advised to rethink in changed landscape


Executives from consulting firm Deloitte Research used Zappos Inc.'s policy of offering new employees cash to leave as an example of the lengths retailers must go to stay afloat amid a drastically changing retail landscape.

After a training period, online retailer Zappos offers employees $2,000. Those who choose to stay have made a commitment to the company and are more likely to be dedicated employees, chief operating officer Alfred Lin said in a recorded video presented at the National Retail Federation's annual conference in New York.

Carl Steidtmann, the chief economist of consumer business at Deloitte Research, said that over the past year, the retail industry has been in the midst of a "great transformation" as consumer spending dropped and credit tightened.

Following an "orgy of debt" in the early part of the decade, "the consumer is no longer in a position to spend," he said. "Retailers are in a 'no-growth' environment."

The consumer-spending slowdown will likely be long lasting, particularly as baby boomers who have been typically big spenders move into their 60s and 70s, spend less and downsize their homes, Steidtmann said.

He also said retailers are going to have to toughen up as their competitors declare bankruptcy and liquidate -- and as retail space contracts as malls shutter and banks continue limiting their lending.

Stacy Janiak, vice chairman and U.S. retail leader for Deloitte, said one way retailers can combat the weak economy is through innovation.

The Zappos anecdote is an example of an "innovative approach to investing in employees," she said.

"Standing still is not an option," she said. Retailers must make sure they structure business around the customer and make strategic technology investments, particularly technology related to cell phones and mobile shopping, she said.

Online retail is also key, she said, since research company Forrester predicts that by 2012 49 percent of all U.S. retail sales will be made online, Janiak said.

"Staying the course isn't likely the best answer," Janiak said. "Innovative thinking is needed."


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