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There will be as many as 10,000 retail store closures by the end of 2009, according to Chicago-based corporate consultancy Grant Thornton, LLP. Its “Reviving Retail: Strategies for Growth in 2009” report highlights the fact that the success of online retailers combined with consumers’ adoption of private label has greatly affected businesses.
Consumers are moving away from shopping at brick-and-mortar stores, instead turning to online shopping in increasing numbers. The report points to 2008 sales where a handful of online companies like Zappos.com grew within this constricted economic environment.
Even product categories that took a hit in 2008 were less vulnerable online. For example jewelry and watches declined 34 percent overall, but only 24 percent online. Apparel sales were off 19 percent overall, but only 4 percent online.
Private label brands, meanwhile, have made shoppers more sensitive to price. The report cited recent data from The Nielsen Company that showed private label sales have grown 9 percent. This is due to increasing interest in the grocery sector as well as the improvement of the quality of the products offered.
“Falling sales hit all regions of the country and nearly all retail sectors, challenging stores and pushing many to the brink of failure,” said Marti Kopacz, national managing principal of Grant Thornton. “Either retailers are contemplating bankruptcy, have already declared it or are announcing significant reductions.”
Retailers can fight back by embracing sustainability, customer relations and online marketing, according the report. Even in tough economic times, many top companies such as J.C. Penney and Home Depot are maintaining or increasing their sustainability budgets, as consumer demand for green products continues to rise.
Additionally, companies can strengthen customer relations to the brick-and-mortar locations through the use of online communication and special offers via e-mail. “Although there’s high risk in the retail industry, now is the time for companies to fine-tune their business and take advantage of new opportunities,” said Grant Thornton principal Scott Davis. “The winners will be the disciplined companies investing the time, effort and resources to re-examine their strategies and position themselves for growth.”