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Retail puts an end to revolutions

28 March, 2010

From left to right, the Managing Director of the Farggi group, the partner and consultant of Axis Consultants, the Managing Director of Cóndor and the Director of Expansion and of the Bussiness Unit of Gaes in Catalonia and The Balearic Islands.

The retail sector is dealing with difficult times and its more than 100,000 companies have had to ride it out across many fronts at the same time. The drop in demand, the lack of financing services and the decrease in profit margins are some of the challenges arising from the current economic recession. In view of this situation, experts and companies that participated in the “Retail Strategies in times of Recession” seminar, organised by the Chamber of Commerce of Barcelona, affirm that it is necessary to be very creative. “Maximising your imagination with a lower budget is one of the weapons that we must use in the face of the recession”, explains Isabel Mesa, Director of WGSN Consultants for Spain and Portugal.

This is one of the answers to overcoming the main weakness of the retail sector since the economic recession began in 2008: the drop in demand. In this regard, data by Joan Ramon Rovira, the Chief of Staff of Economic Studies of the Chamber of Commerce of Barcelona, confirms that the current recession will not be overcome by an increase in consumption. As a result, the sector analysts are targeting an evolution of already existing formats instead of trying out new revolutionary and risky formulas that are associated more with abundant times.

Positive Evolutions

“In Farggi, we have had to sell products that we had never considered offering before. As a result, we have been able to complement our usual offer “, explains Eduard Farga, the Managing Director of the Farggi group. This entrepreneur assures that when times are bad, “we have to reinvent ourselves” even though “the changes that his company has made have not been easy”. The example of Farggi, in the Catering Sector, can also be seen in other retail areas such as the health sector. For example, Gaes, a company that specialises in ear prosthesis, has had to adapt its financing services to a much more speculative buyer. “Before, our clients used to decide to buy during their first appointment. Now the process is much longer and the majority needs to discuss the matter with their family “, explains Susana Quesada, the Director of Expansion and of the Business Unit of Gaes in Catalonia and the Balearic Islands. As a result, the companies have launched flat rates that are adapted to the new circumstances of family economies.

It is evident that times of compulsive shopping have come to an end. Nowadays, any shopping process comes with a real value analysis of the purchase. This is also the opinion of partner and consultant, Josep Maria Galí, of Axis Consultants. This expert in consumer guidelines and behaviour affirms that figures such as those indicating that in 2009, between 20 and 30 per cent of the population found it difficult to reach the end of the month “foster much more intelligent consumption”.

Nevertheless, the extensive information that customers have nowadays has changed the retail sector, as indicated by this expert: People wonder “is this profit margin legitimate?” Nowadays there is no more mystery, people have much more information and they know the real cost of products. Therefore, they will not accept abusive margins. In this regard, Galí has the answer: “Prices have to come down”. But he is also aware that it is not easy to make this type of recommendation to companies in an economic climate like the present one: “We tell our clients that if they lower their prices, there will be demand”.

A solution that is not always possible. Roser Ramos, the Managing Director of Cóndor, believes that when the production is at home, the margins had are “nothing to shout about”. Consequently, this firm that specialises in the production of tights, socks and children’s clothes wants to “maintain current prices and their quality for as long as possible”. Cóndor, which has also been commercialising its products in its own 3 shops since 2005, has decided to become more flexible with regard to ordering periods. “We have noticed that our clients’ sales have curbed. We have 4000 retail clients all over the world that now make smaller orders. As a result, we are allowing for purchase repetition. We send the product when they need it”, explains Ramos. This new option means that Cóndor has increased its stock management costs but it is also a flexible and resolute response to the current situation.

Nowadays, the retail sector represents 14% of the occupied population in Catalonia and it generates 12.7% of the economy’s Gross Added Value. Its importance is indisputable, according to Miquel Valls, Chairman of the Chamber of Commerce of Barcelona, who also highlights the “level of initiative and innovation that has always characterised the sector”.

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