Forecasting retail shakeout

Nimble performers will draw net benefit from the coming shakeout, forgetting survivor guilt.

Recent business confidence readings show a further slide in sentiment in May and the second quarter, but fail to show the conclusions being drawn by lean but still profitable companies. They are looking to grow through the acquisition of ailing competitors or by simply taking on board the customers left by weaker brethren who gradually shut down.

There are anecdotal reports of some operators in the service sector simply ceasing to trade. In retailing, some small players reportedly look on the upcoming pre-Christmas trading period as make-or-break time for their already weakened businesses.

The research information, gathered from several sectors shows a similar pattern in many service and retail operations - volumes are down or flat, but sales are still being made and surprisingly small interventions have disproportionately large impact.

It is four years since the end of our recession, but few businesses have returned to glowing health. Corporate anorexia has now ended, as businesses cannot cut back any more.

They are looking for price-efficient solutions that achieve measurable sales gains. Smart tactics at low cost often work. For example, in the leisure industry a modest investment in giveaways at the gate resulted in streams of new customers for one Gauteng casino-resort.

The message that resonates most strongly with clients is that customer service investment does not need to be huge. Customers can be wooed through courtesy and consideration. Staff can be motivated without sending them on a luxury cruise. Therefore smart, affordable promotional tactics and staff motivation on a tight budget have become focus areas for an increasing number of companies.

Businesses now fall into two categories - those hanging on grimly in the hope of survival and those hanging on strategically, knowing they will make it into 2014 and will then pick up the pieces and grow. For the present, they control their expenses while squirreling away their earnings. They know a shakeout is coming and plan to profit from it.