Recession creates new rules of retailing

National Retail Federation president and chief executive Tracy Mullin opened the organisation's 98th convention in New York on Sunday with a blunt message to businesses trying to ride out the recession: They need to get real to the new rules of retailing.

Mullin argued that the deteriorating economic conditions in the United States are starting to create changes in consumer behaviour  and attitudes which could become permanent.

She said: "It has become chic to be cheap," arguing that price will be a fundamental consideration for US consumers for the foreseeable future.

One in 10 Americans fear for their jobs, according to NRF, and more than half say that they are only purchasing things that they need. US consumer trends provide a worrying insight into what UK retailers could come up against as our own economy contracts this year.

Within the first hour of the conference, US retailers were already talking about the re-emergence of layaways, a practice that had gone out of fashion. And during a quick visit to a Duane Reade drugstore on Sunday night, announcements were playing explaining that the chain now accepts food stamps.

Mullin said that US consumers who still have money to spend are turning to cash. In fact, she has heard reports that many retailers were running out of change on Black Friday, so many consumers were paying with cash.

Even her view on the sweet spot of retailing - e-commerce - was muted. Online shopping in the States will grow by between 7 per cent to 12 per cent this year, rather than the 20 per cent to 30 per cent that the industry has become used to, she predicted. And she spoke of the emergence of consumers doing ìaggressive internet researchî before they hit the shops.

But despite this, the news is not all bad. And the message from the States validates what the likes of John Lewis are already beginning to experience in the UK.

Loyalty to brands that provide great value, quality products and fantastic customer service is massively increasing.

Technology giant IBM surveyed 20,000 consumers in September last year as part of its annual survey on retail. The results were so startling, that it spoke with 10,000 more in November, just to validate what it saw.

Since the same exercise was completed in 2007, the number of Americans that IBM defines as "advocates" - that is, shoppers who recommend a primary brand to friends and family and stay loyal to this brand despite competitive offers - has almost doubled.

In 2007, the figure stood at 21 per cent of US consumers; it is now 38 per cent.

So the message from the States is that this recession will polarise the retail industry. Great retailers have an opportunity to thrive; those that ignore the new rules might well find that they don't survive.

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