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How Three Retail Challenges Outweigh the Others

How Three Retail Challenges Outweigh the Others

What me worry?”

That's the signature phrase of Mad Magazine's unabashedly care-free fictional character Alfred E. Neuman.

Alfred would never make it as a food retailer. That job comes with lots of worries, and the latest data shows retailers are more anguished than ever.

The just-released version of Food Marketing Institute's annual “Worry Index,” which tracks average impact of key issues, shows increased anxiety about a range of topics. The index is part of FMI's Food Retailing Industry Speaks report.

Respondents rated concerns on a 1-to-10 scale (10 is highest), and this is the first time that as many as three issues produced worry scores above 8.0. Those were: local and national economy (8.7), competition from other retailers (8.1) and health care costs (8.1).

The 2010 responses were solicited in the first quarter with retailers projecting on concerns for the balance of the year. But it's doubtful the results would be much different now because the three chief topics are still top of mind.

It's interesting to note that the nature of retailer concerns has morphed over time. Consider the economy. Early in the recession the imperative was to provide value solutions to customers, and merchants grappled with the competing goals of sales growth or margin enhancement. Today the economy is still all-important, but there are more variables. For example, higher-income consumers are making a comeback, which changes strategies for some retailers.

There are a few silver linings in the midst of the challenges. The troubled economy may be leading retailers to worry, but it's also driven consumers to visit supermarkets more frequently — far more often than other formats. FMI’s U.S. Grocery Shopper Trends survey found consumers are making an average of 2.1 visits per week, up from 2.0 visits in 2009.

Moreover, the intense retailer focus on a few key topics — the economy, competition and health care costs — ensures those topics will gain more attention and resources from retailers, which in turn should help ease the challenges.

It's useful to look beyond the big three worries to see how other topics have fared in recent years. Concern over energy costs has fallen along with energy prices. The Worry Index number fell in 2010 to a 6.8 level from as high as 7.5 in 2006 and 2007, according to FMI.

Environmental concerns have risen to the 5.3 mark from as low as 2.9 in 2004. Worries over staffing, hiring and retention have dropped to 4.7 from 6.5 in 2006, not surprising given the fact that employees tend to stay put in a tough economy. And consumer privacy concerns have grown to 3.8 from a low of 2.6 in 2005.

Which will be the big three issues a year or two from now? I would bet the same three, but some secondary topics will grow or decline in importance depending on the economy's trajectory. For example, if the economy improves, the topic of staffing, hiring and retention will probably grow in importance.

Similarly, if the economy advances, the topic of restaurants and other foodservice establishments will likely gain more attention as these outlets rebound (this topic scored a ranking of 4.9, down from a high of 5.4 in 2008).

One sure thing is there'll continue to be lots to worry about. It's just a question of what the specific content will be.