By Barbara Thau
NEW YORK–Fiscal responsibility, conservatism and the contraction of the retail sector were recurring themes at the National Retail Federation’s annual meeting and Financo’s accompanying industry seminar.
Gordon Segal, founder and chairman of Crate & Barrel, said at the Financo seminar that there will eventually be 20 to 30 percent fewer stores in the home furnishings retail space.
For its part, Crate & Barrel is “dramatically” cutting SKUs and underperforming vendors to keep its inventory in line with lackluster consumer spending.
This economy is like “a pail of cold water on your head,” he said. “Now we’re looking at a whole different world.”
He said the consumer has also become price-sensitive like never before on widely distributed, branded product. “You’ve got to be Google-proof,” Segal said. For example, consumers will shop online for the cheapest Cuisinart product, he said.
The U.S. retail industry will contract as consumer spending is poised to decrease as the share of the nation’s gross domestic product, said Mark Zandi, chief economist and founder of Moody’s Economy.com, during the NRF session.
Retail growth in international markets will eclipse growth in the United States, Zandi said.
U.S. consumers, who have already been living beyond their means, have been “psychologically scarred” by the economic crisis, Zandi said.
To help speed a recovery, the $350 billion leftover from the government’s bailout package should be invested in foreclosure mitigation, he said. “There is nothing more debilitating to the consumer psyche than people losing their homes.”
Peter Solomon, chairman of investment banking firm Peter Solomon Co., said merchants must forgo store openings to please Wall Street and capital expenditures and instead reserve cash to help stave off extinction.
Although the auto industry gets more attention, the troubled retail sector with about 25 million jobs, is the largest private employer in the United States and lost more jobs than the car industry in 2008, said Myron Ullman, chairman and chief executive officer of J.C. Penney, during the NRF session. “If that doesn’t impress upon you the economic impact of our industry in terms of our economy, I don’t know what would,” he said.