Retailers predict years of economic gloom!
LONDON, England - July 20, 2009 - The survey of 100 of the world's biggest retail groups by consultants AlixPartners found that as well as short-term action, such as paying suppliers late, companies were making massive structural changes to their operations to cope with the unprecedented trading gloom.
It comes just days after Allied Carpets became the latest high-profile retailer to fall into administration and ahead of official retail sales figures to be published this week, which are expected to further underline the precarious nature of the high street.
A shortage of shoppers is not the only problem for retailers as two thirds of respondents told AlixPartners they were experiencing difficulties with major suppliers, leading to stock shortages.
One worrying finding of the study was that almost three quarters of respondents were not communicating frequently with their suppliers' credit insurers.
The withdrawal of cover by credit insurers to suppliers has proved to be a tipping point in the demise of many businesses in the Depression, including Woolworths, and has been cited in recent weeks as a problem by office supply company Vasanta and pubs group Punch Taverns.
Credit insurers are nervous about the cash situation of many groups and the AlixPartners study found that nearly half of those surveyed had seen their suppliers' credit limits cut.
Sanjay Bailur, a director at AlixPartners, said, "While retailers are rolling up their sleeves and battling through the challenges of today's tough environment, their weapons are not very sharp.
"This study shows that retailers across Europe and elsewhere are not communicating regularly enough with credit insurers. This lack of communication, coupled with a lax approach to cash management, can quickly result in companies facing serious liquidity issues."
Pippa Wicks, a managing director at AlixPartners, said the best retailers and managers were putting cash management under the microscope, but only half of those interviewed were looking at their cash on a weekly basis.
"In today's environment, relatively healthy companies can suddenly find themselves in a liquidity crunch if they don't keep a close eye on the cash," she said.
To cope with the continuing downturn, retailers said that they had made significant changes to the structure of their businesses, including store and warehouse closures, staff cuts, and reducing the amount of product offered for sale.
It comes just days after Allied Carpets became the latest high-profile retailer to fall into administration and ahead of official retail sales figures to be published this week, which are expected to further underline the precarious nature of the high street.
A shortage of shoppers is not the only problem for retailers as two thirds of respondents told AlixPartners they were experiencing difficulties with major suppliers, leading to stock shortages.
One worrying finding of the study was that almost three quarters of respondents were not communicating frequently with their suppliers' credit insurers.
The withdrawal of cover by credit insurers to suppliers has proved to be a tipping point in the demise of many businesses in the Depression, including Woolworths, and has been cited in recent weeks as a problem by office supply company Vasanta and pubs group Punch Taverns.
Credit insurers are nervous about the cash situation of many groups and the AlixPartners study found that nearly half of those surveyed had seen their suppliers' credit limits cut.
Sanjay Bailur, a director at AlixPartners, said, "While retailers are rolling up their sleeves and battling through the challenges of today's tough environment, their weapons are not very sharp.
"This study shows that retailers across Europe and elsewhere are not communicating regularly enough with credit insurers. This lack of communication, coupled with a lax approach to cash management, can quickly result in companies facing serious liquidity issues."
Pippa Wicks, a managing director at AlixPartners, said the best retailers and managers were putting cash management under the microscope, but only half of those interviewed were looking at their cash on a weekly basis.
"In today's environment, relatively healthy companies can suddenly find themselves in a liquidity crunch if they don't keep a close eye on the cash," she said.
To cope with the continuing downturn, retailers said that they had made significant changes to the structure of their businesses, including store and warehouse closures, staff cuts, and reducing the amount of product offered for sale.
