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Retail comes of age in the credit crunch

These days, a couple of weeks in retail can feel like a lifetime. Business has been tough for a while, but it almost looks like we have suddenly fallen off the proverbial cliff edge and are now in freefall.

Is this true? If so, could we have seen it coming and done something about it? You also have to wonder how long will it last, and what the future holds.

This is not just about the credit crunch and the fallout from an increasingly squeezed consumer. When the economy recovers and retailers benefit, the pressure will only ease marginally. UK retailing will be a lower-growth, lower-margin business.

Floorspace has grown relentlessly over the past 30 years. And more recently, the internet has diverted sales away from stores and catalogues without making the cake any bigger. Retail has hit a level of maturity never seen before.

When times are hard, it takes guts and confidence to stand out. Too many brands are selling the same uninspired ranges. Shoppers will spend, but they demand relevance and a fashion viewpoint that speaks to them.

With cost growth outpacing sales growth, retailers cannot afford any unnecessary costs. A smarter approach to the cost base is needed – it’s not only consumers that must cut their cloth differently in future.

Driving sales and market share is essential. For years retail has been a seller’s market. It is now a buyer’s market and tailoring everything to the customer is vital.

We should have seen this coming. The writing was on the wall. The market will never be the same and retailers must now act accordingly.

Richard Hyman is a strategic adviser at corporate advisory firm Deloitte

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