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Reasons Retailers See Better Times in Store for 2007

Reasons Retailers See Better Times in Store for 2007

By David Merrefield
Editorial Director

The good news about the year just closed is that the industry started to stir from a long slumber and move in proactive ways to retain and recapture business that was draining away toward non-conventional retailing formats.

The better news is that there's every reason to anticipate that this year will be the time that the changes now being put into effect will produce an even more tangible payoff for those players making the right moves.

Take a look at the news feature referenced on Page 1 of this week's SN for more about the groundwork for success being laid by many retailers.

We'll take a look at some of that in a moment, but first, let's consider the observations of one industry figure quoted in the news feature about how the industry has been changing in recent time: "Over the last several years it seems as if the industry has come out of a bit of a slumber. Today, more folks are realizing they can't do business the way it's been done for the last 50 years. I think a lot of retailers … spent the last few years working on things, and you're seeing a lot of those efforts coming to fruition today."

That's about as apt a summary as could be wanted of what has happened in the food-retailing industry in recent time, and what's likely to continue as 2007 goes on. At least, let's hope so.

Now let's take a look at a couple of the strategies, or situations, mentioned in this week's news feature that seem to be propelling the industry forward.

• Survivors' Rewards:
Some retailers are enjoying rewards simply because they managed to remain in the game as others fell away. Long-standing problems of overcapacity were resolved in some areas as companies such as Winn-Dixie, Albertsons and some Ahold banners were trimmed away. Even Wal-Mart is expanding at a slightly slower rate now than has been the case in previous years. Many smaller retailers fell away too.

This helps the survivors, although at a high cost to those unfortunate enough to have built careers around the withering companies.

• Operational Opportunity:
In a related situation, many independents, their wholesalers and chains alike are finding opportunities in stores offered for sale by the receding players. This provides a chance to make slow but strategic expansions at a cost far less than building entirely new stores. This situation, too, implies that survivors will have a chance to grow stronger than they were in earlier years.

One further consideration: Notwithstanding the signals that justify optimism, many operators are worried about cost containment. Said one: "I think costs are going to squeeze some retailers so they will have to make efforts to keep prices [competitive despite] the increase in fuel costs, which affects utilities and the cost of goods."

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Everyone on the SN staff has new telephone numbers, fax numbers and email addresses too. You can see new contact information for staff members on the table-of-contents page of this week's issue, and those to follow.

Happy New Year from all of us.